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ABC company mixes three main ingredients in the correct quantities to produce a complete pet food for hamsters called 'Healthy Hamster': Product ingredients: Toasted Pea

ABC company mixes three main ingredients in the correct quantities to produce a complete pet food for hamsters called 'Healthy Hamster':

Product ingredients:

Toasted Pea Flakes 10 kg @ 3.0030.00

Peanuts 6 kg @2.2013.20

Sunflower Seeds4 kg @2.6010.40

The planned input of 20kg of the feed products should produce 19.2kg of 'Healthy Hamster'.

The general price of Toasted Pea Flakes has decreased during the period to 2.70 per kg. On the other hand, the price of Peanuts has increased on the open market by 10%.

During the last year 15,264kg of 'Healthy Hamster' have been produced and the following amounts of the ingredients have been consumed.

6,400kg of Toasted Pea Flakes17,920

5,600kg ofPeanuts12,880

4,000kg of Sunflower Seeds10,200

41,000

Required:

1.Calculate the price and mix variances for each product ingredient and the overall yield variance based on the original standards.Comment on the results.

(15 marks)

2.Calculate planning and revised operational variances for the Toasted Pea Flakes and Peanuts price variances calculated in 1) above.Using these variances reconcile the budgeted and actual cost and comment on the performance of management.

(10 marks)

(Total 25: marks)

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