Requirements: Compute the following: Total direct materials price variance The d
ID: 2539003 • Letter: R
Question
Requirements:
Compute the following:
Total direct materials price variance
The direct materials mix variance
The direct materials yield variance
Mix and Yield Variances
Rizzo’s Fish Market Seafood produces cans of seafood mix. The ingredients for each can are crab, shrimp, and oysters. To produce one batch of seafood mix weighing 200 Lbs., the following standard quantities, mix, and prices of these ingredients are needed:
Types of Materials
Standard Quantity (Lbs.)
Standard Mix
Standard Price
Crab
60
30.00%
$ 7.20
$ 432.00
Shrimp
90
45.00%
$ 4.50
$ 405.00
Oysters
50
25.00%
$ 5.00
$ 250.00
200
$ 1,087.00
During the month of May, Rizzo’s Fish Market Seafood had the following information for its actual production:
Actual Production
Number of batches
Lbs. per batch
Total Lbs.
Seafood mix
40
200
8,000
Types of Materials
Actual quantity purchased and used
Actual Mix
Actual Cost per pound
Crab
2,285.70
28.50%
$ 7.50
$ 17,142.75
Shrimp
3,649.10
45.50%
$ 4.40
$ 16,056.04
Oysters
2,085.20
26.00%
$ 4.95
$ 10,321.74
8,020.00
$ 43,520.53
Types of Materials
Standard Quantity (Lbs.)
Standard Mix
Standard Price
Crab
60
30.00%
$ 7.20
$ 432.00
Shrimp
90
45.00%
$ 4.50
$ 405.00
Oysters
50
25.00%
$ 5.00
$ 250.00
200
$ 1,087.00
Explanation / Answer
Material Cost Variance (MCV) = Standard cost - Actual Cost
= (Std. Quantity * Std. Price)-(Actual Quantity*Actual Price)
Positive figures indicate Favourable variance and Negative figures indicate Adverse Variance.
So, those figures with out any symbol are positive and indicates Favourable Variance.
Figures with Negavtive "-" sign indicate Adverse Variance.
Material cost variance can be sub divided into Price Variance and Usage Variance.
Material Price Variance(MPV) = (Standard cost of actual quantity - Actual cost)
= [(SP*AQ)-(AP*AQ)]
Where, SP = Standard Price, AQ = Actual qunatity, AP = Actual price.
Material usage Variance(MUV) = The difference between standard quantity for actual production and the actual quantity at standard price.
= [(SQ*SP)-(AQ*SP)]
Material usage variance can be subdivided into Mix variance and Yield variance.
Material Mix Variance(MMV) = (Standard cost of actual quantity in standard proportion - Standard cost of actual quantity)
= (RSQ - AQ) * SP
Material Yeild Variance(MYV) = [Standard cost of standard quantity for actual production - Standard cost of actual quantitiy in standard proportion]
= [(SQ - RSQ) * SP]
One batch wieghs 200 Lbs.
Standard for one batch is given as below:
Types of Materials
Standard Quantity (Lbs.)
Standard Mix
SP (Standard Price)
Crab
60
30.00%
$ 7.20
$ 432.00
Shrimp
90
45.00%
$ 4.50
$ 405.00
Oysters
50
25.00%
$ 5.00
$ 250.00
200
$ 1,087.00
Actual output is 40 Batches.
Standard for 40 batches will be as follows. i.e. Standard for acutal output
Types of Materials
SQ :Standard Quantity (Lbs.)
Standard Mix
SP (Standard Price)
Crab =60*40 batches
2400
30.00%
7.2
17280
Shrimp =90*40 batches
3600
45.00%
4.5
16200
Oysters =50*40 batches
2000
25.00%
5
10000
8000
43480
Actuals are as below for 40 batches:
Types of Materials
AQ :Actual quantity purchased and used
Actual Mix
AP :Actual Cost per pound
Crab
2,285.70
28.50%
7.5
$ 17,142.75
Shrimp
3,649.10
45.50%
4.4
$ 16,056.04
Oysters
2,085.20
26.00%
4.95
$ 10,321.74
8,020.00
$ 43,520.53
Actual Qantity in Standard proportion (RSQ)
Types of Materials
RSQ
Crab
2,406.00
Shrimp
3,609.00
Oysters
2,005.00
8,020.00
MCV = [(SQ*SP)-(AQ*AP)]
Types of Materials
SQ
SP
AQ
AP
[(SQ*SP)-(AQ*AP)]
Crab
2400
7.2
2,285.70
7.5
137.25
Shrimp
3600
4.5
3,649.10
4.4
143.96
Oysters
2000
5
2,085.20
4.95
-321.74
-40.53
MPV = [(SP*AQ)-(AP*AQ)]
Types of Materials
SP
AQ
AP
AQ
[(SP*AQ)-(AP*AQ)]
Crab
7.2
2,285.70
7.5
2,285.70
-685.71
Shrimp
4.5
3,649.10
4.4
3,649.10
364.91
Oysters
5
2,085.20
4.95
2,085.20
104.26
Total
-216.54
MUV = [(SQ*SP)-(AQ*SP)]
Types of Materials
SQ
SP
AQ
SP
[(SQ*SP)-(AQ*SP)]
Crab
2400
7.2
2,285.70
7.2
822.96
Shrimp
3600
4.5
3,649.10
4.5
-220.95
Oysters
2000
5
2,085.20
5
-426
Total
176.01
Verification:
MCV=MPV+ MUV
MCV
MPV
MUV
MPV+MUV
-40.53
-216.54
176.01
-40.53
MMV = [RSQ - AQ) * SP
Types of Materials
RSQ
AQ
SP
[RSQ - AQ) * SP
Crab
2,406.00
2,285.70
7.2
866.16
Shrimp
3,609.00
3,649.10
4.5
-180.45
Oysters
2,005.00
2,085.20
5
-401
Total
284.71
MYV = [(SQ - RSQ) * SP]
Types of Materials
SQ
RSQ
SP
[(SQ - RSQ) * SP]
Crab
2400
2,406.00
7.2
-43.2
Shrimp
3600
3,609.00
4.5
-40.5
Oysters
2000
2,005.00
5
-25
Total
-108.7
Verification:
MUV= MMV+MYV
MUV
MMV
MYV
MMV+MYV
176.01
284.71
-108.7
176.01
Therefore,
Total direct materials price variance = -216.54 (Adverse Variance)
The direct materials mix variance = 284.71 (Favourable Variance)
The direct materials yield variance = -108.7 (Adverse Variance)
Types of Materials
Standard Quantity (Lbs.)
Standard Mix
SP (Standard Price)
Crab
60
30.00%
$ 7.20
$ 432.00
Shrimp
90
45.00%
$ 4.50
$ 405.00
Oysters
50
25.00%
$ 5.00
$ 250.00
200
$ 1,087.00
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