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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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