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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.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter14: Quality And Environmental Cost Management
Section: Chapter Questions
Problem 9E: Stahman, Inc., estimates its hidden external failure costs using the Taguchi loss function. Stahlman...
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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
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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