Required: (a) Compute the total direct materials price and efficiency variances

Question

Required:

(a) Compute the total direct materials price and efficiency variances in october

(b) compute the total direct materials mix and yield varainces for october

ACC 318, Ch 8&9, Variance Analysis 1 Wh yteA venue Fruits, Inc. processes tropical fruit into fruit salad mix, which it sells to a food-service company. WhyteAvenue Fruits has in its budget the following standards for the direct materials inputs to produce a batch of 80 kilograms of tropical fruit salad. Standard Price per Kilogram $1.00 0.50 0.75 Standard Quantity in Kilograms Standard Proportion Pineapples Watermelons Strawberries Total 50 30 20 100 0.50 0.30 0.20 1.00 Note that 100 kilograms of input quantities are required to produce 80 kilograms of fruit salad. No inventories of direct materials are kept. Purchases are made as needed so all price variances are related to direct materials used. The actual direct materials inputs used to produce 54,000 kilograms of tropical fruit salad for October were: 36,400 18,200 15.400 70,000 kilograms of pineapples at $0.90 per kilogram kilograms of watermelons at $0.60 per kilogram kilograms of strawberries at $0.70 per kilogram $32,760 10,920 10.780 $54.460 Required: (a) Compute the total direct materials price and efficiency variances in October. (b) Compute the total direct materials mix and yield variances for October.

Explanation / Answer

Solution - a:

Standard input quantity required for 54000 Kg Fruit Salad = 54000*100/80 = 67500 Kg

SQ of Pineapples = 67500*0.50 = 33750 Kg

SQ of Watermelons = 67500*0.30 = 20250 Kg

SQ of Strawberries = 67500*0.20 = 13500 Kg

Direct material price variance = (SR – AR) * AQ

Pineapples = (1 - 0.90) * 36400 = $3,640 F

Watermelons = (0.50 – 0.60) * 18200 = $1,820 U

Strawberries = (0.75 – 0.70) * 15400 = $770 F

Direct Material efficiency variance = (SQ – AQ) * SR

Pineapples = (33750 - 36400) * 1 = $2,650 U

Watermelons = (20250 – 18200) * 0.50 = $1,025 F

Strawberries = (13500 – 15400) * 0.75= $1,425 U

Solution - b:

Standard mix of actual Quantity:

Pineapples = 70000*0.50 = 35000 Kg

Watermelons = 70000*0.30 = 21000 Kg

Strawberries = 70000*0.20 = 14000 Kg

Direct material mix variance = (Standard Mix – Actual Mix) * SP

Pineapples = (35000 - 36400) * 1 = $1,400 U

Watermelons = (21000 – 18200) * 0.50 = $1,400 F

Strawberries = (14000 – 15400) * 0.75= $1,050 U

Standard yield of actual quantity = 70000/100*80 = 56000 Kgs

Actual yield = 54000 Kg

Standard cost of 80 Kg Fruit salad:

Pineapples = 50*1 = $50

Watermelons = 30*0.50 = $15

Strawberries = 20*0.75 = $15

Total = 50 + 15 + 15 = $80

Yield variance = (Standard Yield – Actual Yield) * SP

Pineapples = (56000 - 54000) * 50/80 = $1,250 U

Watermelons = (56000 – 54000) * 15/80 = $375 U

Strawberries = (56000 – 54000) * 15/80 = $375 U

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