Page 132 - P1 Integrated Workbook STUDENT 2018

Chapter 8

Example 1

Pallister manufactures a beauty product that requires two types of powder with
the following details:

Powder Input (grams) Cost per gram Total cost
Fine 9 $0.05 $0.45
Harsh 3 $0.01 $0.03
Total 12 $0.48
These inputs typically provide 10 grams for each unit of finished output.

In December, Pallister produced 18,000 finished units of the product with the
following input of powder:

Fine powder 163,800 grams

Harsh powder 50,400 grams

Calculate the materials mix and yield variances using both the individual
and weighted average methods.

Solution

Materials yield variance

This will be the same under both methods.

The standard yield = 214,200 grams (actual input) × 10/12 (budgeted ratio of
output to input) = 178,500 grams

The actual yield = 180,000 grams (18,000 units × 10 grams per unit)

The average price per gram of output is $0.48/10 = $0.048

Actual yield (output) 180,000
Standard yield from actual input 178,500
––––––––
1,500
@ Average price per gram $0.048
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Variance $72 Fav
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