Question
Problem 17-38 Materials Mix and Yield Variances (LO 17-4) Houston Corporation manufactures a wide variety of chemical compounds and liquids for industrial uses. The standard
Problem 17-38 Materials Mix and Yield Variances (LO 17-4)
Houston Corporation manufactures a wide variety of chemical compounds and liquids for industrial uses. The standard mix for producing a single batch of 1,000 liters of Rust-Off is as follows: |
Input Chemical | Quantity (in liters) | Cost (per liter) | Total Cost | |||||
z-Alpha | 600 | $ | 9 | $ | 5,400 | |||
z-Beta | 450 | 12 | 5,400 | |||||
z-Gamma | 200 | 24 | 4,800 | |||||
1,250 | $ | 15,600 | ||||||
There is a 20 percent loss in liquid volume during processing due to evaporation. The finished liquid is put into 5-liter bottles for sale. Thus, the standard material cost for a 5- liter bottle is $78 [= ($15,600 1,000 liters) 5 liters per bottle]. |
The actual quantities of direct materials and the cost of the materials placed in production during March were as follows (materials are purchased and used at the same time): |
Input Chemical | Quantity (in liters) | Total Cost | |||
z-Alpha | 50,400 | $ | 423,360 | ||
z-Beta | 37,040 | 400,464 | |||
z-Gamma | 16,960 | 417,216 | |||
104,400 | $ | 1,241,040 | |||
A total of 16,000 bottles (80,000 liters) were produced during March. |
Required: | |
Calculate the total direct material variance for the liquid product for the month of March and then further analyze the total variance into: | |
(a) & (b) | Materials price and efficiency variances, materials mix and yield variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round your intermediate calculations. Round Standard mix values to 2 decimal places and the final answers to the nearest dollar amount.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started