Question
Question 3 (20 marks) Blue Caf makes and sells a variety of iced coffee. The main ingredients consist of ground coffee, milk and sugar. The
Question 3 (20 marks)
Blue Caf makes and sells a variety of iced coffee. The main ingredients consist of ground coffee, milk and sugar. The company has a standard costing and variance system in place to control the production process. Management has observed that the sale of the iced coffee was decreasing significantly which has impacted the overall profitability of the company.
The following is the standard cost information to prepare the iced coffee.
| $ |
5.40 kg of ground coffee @ $0.80 per kg | 4.32 |
0.30 kg of milk @ $4.00 per kg | 1.20 |
6.60 kg of sugar @ $0.50 per kg | 3.30 |
Total cost of production of 1 kg of iced coffee | 8.82 |
Actual production was 102,500 kg of iced coffee. Actual costs incurred were:
| $ |
492,000 kg of ground coffee | 418,200 |
29,400 kg of milk | 126,420 |
732,000 kg of sugar | 351,360 |
Required:
(a) Calculate the material price variance.
(6 marks)
(b) Calculate the material mix variance.
(12 marks)
(c) Calculate the yield variance.
(2 marks)
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