Chapter 17, Problem 30E

Materials Mix and Yield Variances

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

1. a.      Compute materials price and efficiency variances.
2. b.      Compute materials mix and yield variances.

To determine

Compute materials price and efficiency variances.

Answer to Problem 30E

The value of materials price variance is $44,000 F, and efficiency variance is $40,000 U for product Alpha, and for product Beta, the materials price variance is $76,000 U, and efficiency variance is $60,000 F.

Explanation of Solution

Materials price variance:

Materials price variance is resultant materials price that has been computed or derived at the end of the accounting period for which the computations are being done.

Efficiency variance:

Efficiency variance is the resultant efficiency that has been computed or derived at the end of the accounting period for which the computations are being done.

Compute the materials price variance:

Particulars	Alpha	Beta
Materials variance:
Actual $\left(\text{AP×AQ}\right)$	$396,000	$1,216,000
Standard $\left(\text{SP×AQ}\right)$	$440,000	$1,140,000
Materials variance $\left(\text{Actual}-\text{Standard}\right)$	$44,000 F	$76,000 U

Table: (1)

Compute the efficiency variance:

Particulars	Alpha	Beta
Mix variance:
Actual $\left(\text{SP×AQ}\right)$	$440,000	$1,140,000
Standard $\left(\text{SP×ASQ}\right)$	$400,000	$1,200,000
Mix variance $\left(\text{Actual}-\text{Standard}\right)$	$40,000 U	$60,000 F
Materials yield variance:
Actual $\left(\text{SP×ASQ}\right)$	$400,000	$1,200,000
Standard $\left(\text{SP×SQ}\right)$	$400,000	$1,200,000
Materials yield variance $\left(\text{Actual}-\text{Standard}\right)$	$0	$0
Efficiency variance $\left(\text{Mix variance }-\text{ Yield variance}\right)$	$40,000 U	$60,000 F

Table: (2)

Measure	Alpha	Beta
AP	$4.50	$8.00
AQ	88,000	152,000
SP	$5.00	$7.50
ASQ	80,000(1)	160,000 (2)
SQ	80,000 (3)	160,000(4)

Table: (3)

Working note 1:

Compute the ASQ for alpha:

$\begin{array}{c}\text{ASQ = Ratio of Alpha }\times \text{Total AQ}\\ \text{=1/3 }\times \text{ 240,000}\\ =80,000\end{array}$

Working note 2:

Compute the ASQ for alpha:

$\begin{array}{c}\text{ASQ = Ratio of Beta }\times \text{Total AQ}\\ \text{=2/3 }\times \text{ 240,000}\\ =160,000\end{array}$

Working note 3:

Compute the SQ of Alpha:

$\begin{array}{c}\text{SQ = Units appropriation in for SP}\times \text{ Acutal output}\\ \text{= 40}\times \text{2,000}\\ \text{=80,000}\end{array}$

Working note 4:

Compute the SQ of Beta:

$\begin{array}{c}\text{SQ = Units appropriation in for SP}\times \text{ Acutal output}\\ \text{= 80}\times \text{2,000}\\ \text{=160,000}\end{array}$

To determine

Compute materials mix and materials yield variances.

Answer to Problem 30E

The value of materials mix and materials yield variances of product Alpha are $$40,000 U and $0 respectively, and the value of materials mix and materials yield variances of product Beta $60,000 and $0respectively.

Explanation of Solution

Materials mix variance:

Materials mix variance is the resultant market mix that has been computed or derived at the end of the accounting period for which the computations are being done for two or more than two products.

Materials yield variance:

Materials yield variance is the resultant difference between the cost of finished goods expected from a specific amount of raw material that has been computed or derived at the end of the accounting period for which the computations are being done.

Compute the materials mix variance and materials yield variance for product Alpha and Beta:

Particulars	Alpha	Beta
Mix variance:
Actual $\left(\text{SP×AQ}\right)$	$440,000	$1,140,000
Standard $\left(\text{SP×ASQ}\right)$	$400,000	$1,200,000
Mix variance $\left(\text{Actual}-\text{Standard}\right)$	$40,000 U	$60,000 F
Materials yield variance:
Actual $\left(\text{SP×ASQ}\right)$	$400,000	$1,200,000
Standard $\left(\text{SP×SQ}\right)$	$400,000	$1,200,000
Materials yield variance $\left(\text{Actual}-\text{Standard}\right)$	$0	$0

Table: (4)

Measure	Alpha	Beta
AP	$4.50	$8.00
AQ	88,000	152,000
SP	$5.00	$7.50
ASQ	80,000(1)	160,000 (2)
SQ	80,000 (3)	160,000(4)

Table: (5)

Thus, the value of materials mix and materials yield variances of product Alpha are $$40,000 U and $0 respectively, and the value of materials mix and materials yield variances of product Beta $60,000 and $0respectively.