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Question 3 (20 marks: 36 minutes) Energy Products Company produces a gasoline additive, Gas Gain. This product increases engine efficienc, and improves gasoline mileage by
Question 3 (20 marks: 36 minutes) Energy Products Company produces a gasoline additive, Gas Gain. This product increases engine efficienc, 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 the 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-litre batch ( 1 batch require 500-litre input) of Gas Gain is R1 350 The standard direct matenals mix and related standard cost of each chemical used in a 500 -litre batch are as follows: The quantities of chemicals purchased and used during the current production period are shown in the following schedule A total of 140 batches of Gas Gain were manufactured dunng the current production period Energy Products determines its cost and chemical usage variations at the end of each production period Required: 3.1 Calculate the total direct materials usage variance and then break it down into its mix and yield components Provide proof that the sum of the mix and yield variances equal usage variance (20)
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