Answered step by step
Verified Expert Solution
Question
1 Approved Answer
results from the difference between actual yield and standard yield. It may be defined as that portion of the direct materials usage variance which is
results from the difference between actual yield and standard yield. It may be defined as that portion of the direct materials usage variance which is due to the standard yield specified and the actual yield obtained. It may arise due to low quality of materials, defective methods of production, carelessness in handling materials, etc. Material yield variance is calculated with the following formula: Standard Rate (Actual yield - Standard yield) t38 Standard Rate is calculated as follows: Std. Rate Standard Cost of Standard mix Net standard output i.e., Gross output - Standard Loss There may be a situation where standard mix may be different from the actual mix. In this case the standard is revised in relation to actual mix and the question is solved with the revised standard and not with the original standard. The standard rate will be calculated as follows: Std. Rate Standard Cost of revised Standard mix Net standard output In the earlier variances if the standard was more than the actual, the variance was favourable. But, in case of material yield variance the case is different. When actual yield is more than the standard yield, the variance will be favourable. Example 7.5: The standard mix of a product is as under: A 60 units at 15 P. per unit Rs. 9 B 80 units at 20 P. per unit Rs. 16 100 units at 25 P. per unit Rs. 25 240 Rs. 50 Ten units of finished product should be obtained from the above mentioned mix. During the month of January, 1996 ten mixes were completed and the consumption was as follows: A 640 units at 20 P. per unit Rs. 128 B 960 units at 15 P. per unit Rs. 144 840 units at 30 P. per unit Rs. 252 2,440 Rs. 524 The actual output was 90 units. Calculate various material variances
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