Chapter five measuring yield, mix and quantity effects learning Objectives


Total direct materials yield variance



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Applied Econometrics using MATLAB, Management and Cost Accounting, case study 301.docx
Total direct materials yield variance
Compare columns 3 and 2 of Exhibit 17.2. Column 3 calculates the flexible-budge cost based on the budgeted cost of the budgeted total quantity of all inputs use (6400 tonnes of apples)
for the actual output achieved (4000 tonnes of cider) times
Exhibit 17.2 total direct materials yield and mix variances for Aliya Ltd for June 2002
Flexible budget Budgeted total quantity
(Actual total quantity Actual total quantity of of all inputs allowed for of all inputs used of all inputs used actual output achieved x Actual input mix)
x Budgeted input mix) x Budgeted input mix) x Budgeted prices x Budgeted prices x Budgeted prices
(1)
(2) (3) Golden Delicious 6500 xxx xxx British Coxes 6500 xxx xxx 153600
Jonagold
6500 xx xx xx
4


87 750 117000 115200
$497 250
$500500 $492800
$ F $ U Total mix variance Total yield variance €4450 U Total efficiency variance the budgeted input mix (Golden Delicious, 50%; British Coxes, 30%; Jonagold, 20%). Column also calculates costs using the budgeted input mix and the budgeted prices. The only difference in the two columns is that column 3 uses the budgeted total quantity of all inputs used (6400 tonnes, while column 2 uses the actual total quantity of all inputs used (tonnes. Hence, the difference in costs between the two columns is the total direct materials yield variance, due solely to differences in actual and budgeted total input quantity used. The total direct materials yield variance is the sum of the direct materials yield variances for each input Budgeted total Budgeted Budgeted
Direct materials yiled Actual total Quantity of all direct materials price of Variance for each input quantity of all direct materials x input mix x direct materials Direct materials inputs allowed percentage input Inputs used for actual output achieved Direct materials yield variance are Golden Delicious
(6500-6400)x0.50x$70=100x0.50x$70 = U British Coxes
(6500-6400)x0.30x$80=100X0.30x$80=
2400U
Jonagold
(6500-6400) x 0.20x$90=100x0.20x$90=
1800U Total direct materials yield variance U The total direct materials yield variance is unfavorable because Aliya uses 6500 tonnes of apples rather than the 6400 tonnes that it should have used to produce 4000 tonnes of cider.
Holding constant the budgeted mix and budgeted prices of apples, the budgeted cost per tonne of apples in the budgeted mix is $77 per tonne. The unfavorable yield variance represents the budgeted cost of using 100 more tonnes of apples (6500-6400) x $77 = $7700 U.

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