Exercise 17-34 (Algo) Materials Mix and Yield Variances (LO 17-5) Proctor Cleaning Products manufactures a product using a process that allows for substitution between two materials, X-1 and Y-7. The company has the following direct materials data for its product Standard costs for one unit of output 68 units of input at $1.00 12 units of input at $4.60 The following results were reported for January: Units of output produced Materials purchased X-1 Y-7 18,375 units 1,207,500 units at $1.02 227,500 units at $4.55 X-1 Y-7 Proctor has a policy of holding no inventories of any kind. Required: Compute materials price and efficiency variances. . Compute materials mix and yield variances.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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