Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed
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- Budgeted prices) (3)
| (Actual costs incurred × Actual inputs) × Actual prices (1) Actual inputs × Budgeted prices (2) Flexible budget (Budgeted inputs allowed for actual output achieved × Budgeted prices) (3) arus 45,000% €5.50 = €247,500 45,000% €6.00 = €270,000 37,500% €6.00 = Erebus 35,000% €4.20 = € 147,000 35,000% €3.50 = € 122,500 28,125% €3.50 = € Uranus 20,000% €2.75 = € 55,000 20,000% €2.50 = 50,000 28,125% €2.50 = € All fluids €449,500 €442,500 €393,750.00 ↑ €7,000 U ↑ €48,750 U ↑ Total price variance Total efficiency variance ↑ €55,750 U ↑ Total flexible-budget variance F = favourable effect on operating income U = unfavourable effect on operating income. 2 Solution Exhibit B presents the direct materials yield and mix variances for Tartarus, Erebus and Uranus and in total for Markku Antero for the week. The direct materials yield variances can also be calculated as Direct materials yield variance for each input = Actual total quantity of all direct materials inputs used Budgeted total quantity of all direct materials inputs allowed for actual output achieved Budgeted direct materials input mix percentage × Budgeted price of direct materials input Tartarus = (100,000 – 93,750) × 0.40 × €6.00 = 6,250 × 0.40 × €6.00 = €15,000.00 U Erebus = (100,000 – 93,750) × 0.30 × €3.50 = 6,250 × 0.30 × €3.50 = 6,562.50 U Uranus = (100,000 – 93,750) × 0.30 × €2.50 = 6,250 × 0.30 × €2.50 = 4,687.50 U Total direct materials yield variance €26,250.00 U The direct materials-mix variances can also be calculated as Direct materials mix variance for each input = Actual direct materials input mix percentage – Budgeted direct materials input mix percentage Actual total quantity of all direct materials inputs used Budgeted price of direct materials input Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5 th Edition, Instructor’s Manual © Pearson Education Limited 2012 Tartarus = (0.45 – 0.40) × 100,000 × €6.00 = 0.05 × 100,000 × €6.00 = €30,000 U Erebus = (0.35 – 0.30) × 100,000 × €3.50 = 0.05 × 100,000 × €3.50 = 17,500 U Uranus = (0.20 – 0.30) × 100,000 × €2.50 = –0.10 × 100,000 × €2.50 = 25,000 F Total direct materials mix variance €22,500 U 3 Markku Antero has an unfavourable direct materials price variance of €7,000 and an unfavourable direct materials efficiency variance of €48,750. Both the yield and the mix variances are unfavourable. Markku Antero may have used more quantities of all input fluids because of the lower quality of Tartarus and Erebus. The unfavourable direct materials mix variance occurs with Tartarus and Erebus because Markku Antero used a greater percentage of these fluids in its direct materials mix than budgeted. Uranus shows a favourable direct materials mix variance because the actual direct materials mix percentage of Uranus is less than the budgeted direct materials mix percentage. The total direct materials mix variance is unfavourable because the actual mix of direct materials inputs had a greater proportion of the more costly inputs (Tartarus and Erebus) than the budgeted mix. Direct materials-yield and direct materials-mix variances are especially informative when management can substitute among the individual material inputs. Such substitution is possible in the processing of individual inputs into perfume. Download 1.72 Mb. Share with your friends:
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