Solution Exhibit Ab Columnar presentation of direct materials price and efficiency variances for Tropica AB 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) Pineapple 36,400 × SFr 0.90 = SFr 32,760 36,400 × SFr 1 = SFr 36,400 33,750 × SFr 1 = Watermelons 18,200 × SFr 0.60 = SFr 10,920 18,200 × SFr 0.50 = SFr 9,100 20,250 × SFr 0.50 = Mango 15,400 × SFr 0.70 = 10,780 15,400 × SFr 0.75 = SF 13,500 × SFr 0.75 = All inputs SFr 54,460 SFr 57,050 SFr 54,000
↑ SFr 2,590 F ↑ SFr 3,050 U Total price variance Total efficiency variance ↑ SFr 460 U Total flexible-budget variance F = favourable effect on operating income U = unfavourable effect on operating income. 2 Solution Exhibit B presents the total direct materials yield and mix variances for Tropica, AB for October. The total direct materials yield variance can also be calculated as the sum of the direct materials yield variances 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 inputs Pineapple = (70,000 – 67,500) × 0.5 × SFr 1.00 = 2,500 × 0.5 × SFr 1.00 = SFr 1,250 U Watermelon = (70,000 – 67,500) × 0.3 × SFr 0.50 = 2,500 × 0.3 × SFr 0.50 = 375 U Mango = (70,000 – 67,500) × 0.2 × SFr 0.75 = 2,500 × 0.2 × SFr 0.75 = 375 U Total direct materials yield variance SFr 2,000 U The total direct materials mix variance can also be calculated as the sum of the direct materials mix variances for each input 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 inputs Pineapple = (0.52 – 0.50) × 70,000 × SFr 1.00 = 0.02 × 70,000 × SFr 1.00 =SFr 1,400 U Watermelon = (0.26 – 0.30) × 70,000 × SFr 0.50 = –0.04 × 70,000 ×SFr 0.50 = 1,400 F Mango = (0.22 – 0.20) × 70,000 × SFr 0.75 = 0.02 × 70,000 ×SFr 0.75 = 1,050 U Total direct materials mix variance SFr 1,050 U