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The Big Beer Company is a craft brewery in a small town in Eastern Ontario. Their signature beer is an Indian Pale Ale (IPA). Budgeted
The Big Beer Company is a craft brewery in a small town in Eastern Ontario. Their signature beer is an Indian Pale Ale (IPA). Budgeted costs to produce a barrel of IPA are as follows: Input Quantity Price Total Standard Cost 10 kg of Cascade Hops $5.00 per Direct materials $ 50 kg 8 kg of Centennial Hops 52 $6.50 per kg They had budgeted to make 10,000 barrels of IPA this year. Actual results for the year were as follows: Produced 11,000 barrels of IPA Direct material purchased: 125,000 kg of Cascade Hops at $5.20/kg 85,000 kg of Centennial Hops at $6.40/kg Direct materials used: 126,000 kg of Cascade Hops 80,000 kg of Centennial Hops Required: a) Calculate the following: i. Direct Material Quantity (Efficiency)Variances. ii. Direct Material Mix Variances iii. Direct Material Yield Variances b) Explain what happened as if you were explaining the variances to someone who had never seen a variance before
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