Page 433 - PM Integrated Workbook 2018-19
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Answers









                   Example 5





                   Hondru operates a standard costing system.

                   The standard direct materials to produce 1,000 units of output is as follows:

                   Material Grade          Input quantity      Standard price per kg
                                               (kgs)                     ($)
                   A                            600                     1.10
                   B                            240                     2.40

                   C                            360                     1.50
                   During April, the actual output of the product was 21,000 units. The actual
                   materials issued to production were:

                   Material Grade                         Quantity (kgs)
                   A                                         14,000
                   B                                          5,500

                   C                                          5,500

                   Calculate the material yield variance. Comment on the figures calculated.

                   (1)

                   Total input of 25,000 kgs should produce       20,833 units of output
                   (@ 1.2 kgs per unit)

                   (2) 25,000 kgs did produce                     21,000 units of output

                   (3) Difference = yield variance in units       167 units favourable

                   (4) Value at the standard cost of (working)  $1.78 per unit
                   (5) Yield variance                             $297 favourable

                   Working


                   Standard cost per unit = ((600 × $1.10) + (240 × $2.40) + (360 × $1.50))/
                   1,000 units = $1.78 per unit.

                   The favourable variance is due to more output being achieved than was
                   expected from the materials input.





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