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Energy Products Company produces a gasoline additive, Gas Gain. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in
Energy Products Company produces a gasoline additive, Gas Gain. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process. Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. If the controls are not effective, there can be a loss of output and efficiency. The standard cost of producing a 500-liter batch of Gas Gain is $135.00. The standard direct materials mix and related standard cost of each chemical used in a 500 liter batch are as follows: Chemical Mix SP Standard Cost Echol 200 liters $0.200 $40.00 Pratex 100 0.425 42.50 Benz 250 0.150 37.50 CT-40 50 0.300 15. DO Total 600 liters $ $135.00 The quantities of chemicals purchased and used during the current production period are shown in the following schedule. A total of 240 batches of Gas Gain were manufactured during the current production period. Energy Products determines its cast and chemical usage variations at the end of each production period. Chemical Quantity Used Echal 45,600 liters Pratex 22,000 Benz 64,800 CT-40 12.960 Tata! 145,440 liters Required: Compute the total direct materials usage variance, and then break down this variance into its mix and yield components. Do not round intermediate computations and round final answers to the nearest cent. (CMA adapted) Usage variance $ Mix variance Yield variance $
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