Textbook Problem

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Chypre, Inc., produces a cologne mist using a solvent mix (water and pure alcohol) and aromatic compounds (the scent base) that it sells to other companies for bottling and sale to consumers. Chypre developed the following standard cost sheet:

On May 2, Chypre produced a batch of 1,000 gallons with the following actual results:

Required:

1. 1. Calculate the yield ratio.
2. 2. Calculate the standard cost per unit of the yield. (Round to the nearest cent.)
3. 3. Calculate the direct materials yield variance. (Round to the nearest cent.)
4. 4. Calculate the direct materials mix variance. (Round to the nearest cent.)

To determine

Compute the yield ratio.

Explanation of Solution

Direct material yield variance: The direct materials yield variance is calculated to show the extent to which the amount of input resulted in the estimated amount of output.

The following formula is used to calculate yield variance:

 $\text{Yield variance = }\left(\text{Standard yield}-\text{Actual yield}\right)\text{SPy}$

The following formula is used to calculate yield ratio:

 $\text{Yield ratio = }\left(\frac{\text{Total output}}{\text{Total input}}\right)$

The following formula is used to calculate standard yield:

 $\text{Standard yield = Yield ratio}\times \text{Total actual inputs}$

The following formula is used

To determine

Compute the standard cost per unit of the yield.

To determine

Compute the direct materials yield variance.

To determine

Compute the direct materials mix variance.