Energy Products Company produces a gasoline additive, Gas Gain. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved, and the evaporation is controlled If the controls are not effective, there can be a loss of output and efficiency 1 The standard cost of producing a 500-litre batch (1 batch require 500-litre input) of Gas Gain is R1 350 The standard direct materials mix and related standard cost of each chemical used in 500-litre batch are as follows: Required: Chemical Echol Protex Benz CT-40 Total Mix 200 litres 100 Litres 250 litres 50 litres 600 litres The quantities of chemicals purchased and used during the current production period are shown in the following schedule A total of 140 batches of Gas Gain were manufactured during the current production period Energy Products determines its cost and chemical usage variations at the end of each production period Standard price R2 R4 25 R1 50 R3 Chemical Echol Protex Benz CT-40 Total Standard cost R400 R425 R375 R150 R1 350 Quantity used 26 600 litres 12 880 litres 37 800 litres 7 140 litres 84 420 litres Calculate the total direct materials usage variance and then break it down into its mix and yield components Provide proof that the sum of the mix and yield variances equal usage variance.
Energy Products Company produces a gasoline additive, Gas Gain. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved, and the evaporation is controlled If the controls are not effective, there can be a loss of output and efficiency 1 The standard cost of producing a 500-litre batch (1 batch require 500-litre input) of Gas Gain is R1 350 The standard direct materials mix and related standard cost of each chemical used in 500-litre batch are as follows: Required: Chemical Echol Protex Benz CT-40 Total Mix 200 litres 100 Litres 250 litres 50 litres 600 litres The quantities of chemicals purchased and used during the current production period are shown in the following schedule A total of 140 batches of Gas Gain were manufactured during the current production period Energy Products determines its cost and chemical usage variations at the end of each production period Standard price R2 R4 25 R1 50 R3 Chemical Echol Protex Benz CT-40 Total Standard cost R400 R425 R375 R150 R1 350 Quantity used 26 600 litres 12 880 litres 37 800 litres 7 140 litres 84 420 litres Calculate the total direct materials usage variance and then break it down into its mix and yield components Provide proof that the sum of the mix and yield variances equal usage variance.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Energy Products Company produces a gasoline additive, Gas Gain. This product increases engine efficiency
and improves gasoline mileage by creating a more complete burn in the combustion process
Careful controls are required during the production process to ensure that the proper mix of input chemicals
is achieved, and the evaporation is controlled If the controls are not effective, there can be a loss of output
and efficiency
3.1
The standard cost of producing a 500-litre batch (1 batch require 500-litre input) of Gas Gain is R1 350. The
standard direct materials mix and related standard cost of each chemical used in a 500-litre batch are as
follows:
Required:
Chemical
Echol
Protex
Benz
CT-40
Total
Mix
200 litres
100 Litres
250 litres
50 litres
600 litres
Standard
price
R2
R4 25
The quantities of chemicals purchased and used during the current production period are shown in the
following schedule A total of 140 batches of Gas Gain were manufactured during the current production
period Energy Products determines its cost and chemical usage variations at the end of each production
period
Chemical
Echol
Protex
Benz
CT-40
Total
R1 50
R3
Standard
cost
R400
R425
R375
R150
R1 350
Quantity used
26 600 litres
12 880 litres
37 800 litres
7 140 litres
84 420 litres
Calculate the total direct materials usage variance and then break it down into its mix and yield
components Provide proof that the sum of the mix and yield variances equal usage variance
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