Suppose your bakery was going to prepare a batch of chocolate chip cookies. The

Question

Suppose your bakery was going to prepare a batch of chocolate chip cookies. The recipe calls for three eggs. They normally cost .15 each. When you broke the first one, it was a double yolk so you only needed one more egg. Unfortunately, the actual cost of the eggs were .19 each.How much was the total expected (standard) cost of the eggs (standard cost x standard usage)? How much was the actual cost of the eggs (actual cost x actual usage)? How much is the total variance? How much is the cost variance? How much is the usage variance? These two equal the total variance.

Explanation / Answer

1. .How much was the total expected (standard) cost of the eggs (standard cost x standard usage)?

$ 0.15 x 3 = $ 0.45

2. How much was the actual cost of the eggs (actual cost x actual usage)?

$ 0.19 x 2 = $ 0.38

3. How much is the total variance?

0.19 x 2 - 45 = $ 0.07 (F)

4. How much is the cost variance?

Total Cost - Actual Cost = 0.30 - 0.38 = $ 0.08 (A)

5. How much is the usage variance?

Should have consumed 3 eggs but consumed only 2 egg so there is favourable variance of 1 egg at the rate of $ 0.15 i.e. 1 x 0.15 = $ 0.15 (F)

Thus, Total Variance verfied that is $ 0.15(F) - $ 0.08(A) = $ 0.07 (F)

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