Question

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

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)