Question

Requirements: Compute the following: Total direct materials price variance The direct materials mix variance The direct...

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

Homework Answers

Answer #1

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

Total

-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)

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