Question 2

Paco chemicals has one product, which requires input from three types of materials to produce batches of soap. Standard cost details for a single batch are shown below:

Material type Standard quantity (kgs) Standard price per kg ($)

S1 8 0.30

S2 5 0.50

S3 3 0.40

A standard loss of 10% of unit is expected. Actual output was 15408 kgs for the previous week. Details of the material used were:

Material type Quantity (kgs)

S1 8,284

S2 7,535

S3 3,334

Required:

1. Calculate the following material variances;

1. Cost
2. Price
3. Mix
4. Yield

2. Explain three significance of analyzing material usage variance into material mix variance and material yield variance