Stacy, Inc., produces a product using a process that allows for substitution bet
ID: 2524740 • Letter: S
Question
Stacy, Inc., produces a product using a process that allows for substitution between two materials, Alpha and Beta. The company has the following direct materials data for its product:
The company had the following results in June:
Required:
a. Compute materials price and efficiency variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
b. Compute materials mix and yield variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
Standard costs for one unit of output Alpha 24 units of input at $ 8.00 Beta 48 units of input at $ 16.50Explanation / Answer
a, Material Price Variance = (Standard Price – Actual Price) x Actual Quantity
Material Price Variance for Alpha = (8 - 7.50) x 99,200 = 49,600 F
Material Price Variance for Beta = (16.50 - 16.80) x 174,400 = -52,320 U
Total Material Price Variance = -2,720 or $ 2,720 Unfavorable
Material Efficiency Variance = (Standard Quantity – Actual Quantity) x Standard Price
Material Efficiency Variance for Alpha = (3,800 x 24 - 99,200) x 8 = -64,000 U
Material Efficiency Variance for Beta = (3,800 x 48 - 174,400) x 16.5 = 132,000 F
Total Material Efficiency Variance = 68,000 F
b. Direct material mix variance = (Standard cost of actual mix - Standard cost of standard mix)
= (Actual Mix Quantity - Standard Mix Quantity) x Standard Price
Let us first calculate the standard mix.
Total Materials Consumption = 99,200 + 174,400 = 273,600 units
We need to calculate the quantity of each raw material which would have been consumed had the total usage of materials (273,600 units) been based on the standard mix.
Alpha = 273,600 x 24 / 72 = 91,200
Beta = 273,600 x 48 / 72 = 182,400
Now mix variance is calculated as under:
for Alpha = (99,200 - 91,200) x 8 = 64,000 U
for Beta = (174,400 - 182,400) x 16.5 = -132,000 F
Total Mix Variance = -68,000 or 68,000 Favorable
Material yield variance = (Standard output - Actual output) x Standard Cost
Standard Output for 273,600 units of material = 273,600 / (24 + 48)
= 273,600 / 72
= 3,800
Therefore, Material yield variance = (3,800 - 3,800) x (8 + 16.50) = 0
Thus Material Yield Variance is nil.
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