Markku Antero Oy produces perfume. To make this perfume, Markku Antero uses three different types of fluid. Tartarus, Erebus and Uranus are used in standard proportions of 4/10, 3/10 and 3/10 , and their standard costs are €6.00, €3.50 and €2.50 per litre, respectively. The chief engineer reported that in the past few months the standard yield has been at 80% on 100 litres of mix. The company maintains a policy of not carrying any direct materials, as stock storage space is costly.

Last week, the company produced 75 000 litres of perfume at a total direct materials cost of €449 500. The actual number of litres used and costs per litre for the three fluids are as follows:

Required

1 Calculate the total direct materials price and efficiency variances for perfume made in the last week.
2 Calculate the total direct materials yield and mix variances for the last week.
3 Explain the significance of the price, yield and mix variances from management’s perspective.

Transcribed Image Text:

Direct materials Actual litres Costs per litre Tartarus 45 000 5.50 Erebus 35 000 4.20 Uranus 20 000 2.75