Kappa Co. produces Omega, an animal feed made by mixing and heating three ingredients: Alpha, Beta, and Gamma. The company uses a standard costing system to monitor its costs. The standard material cost for 100 kg of Omega is as follows: Cost per Kg KG Cost per Kg of omega Alpha 40kg R2 R80 beta 60 kg R5 R300 gamma. 20kg R1 R20 120kg R 400 Additional notes • The mixing and heating process is subject to a standard evaporation loss. • Alpha, Beta, and Gamma are agricultural products, and their quality and price vary significantly fromyear to year. Standard prices are set at the average market price over the last five years. Kappa Co.has a purchasing manager who is responsible for pricing and supplier contracts. • The standard mix is set by the finance department. The last time this was done was at the product launch which was five years ago. It has not changed since. Last month 4 600 kg of Omega was produced, using the following inputs: KG Cost per Kg total Cost Alpha 2200Kg R1.80 R3960 beta 2500kg R6.00 R15000 gamma. 920Kg R1.00 R920 5620kg R19880 At the end of each month, the production manager receives a standard cost operating statement from Kappa Co.’s performance manager. The statement contains material price and usage variances, labour rate and efficiency variances, and overhead expenditure and efficiency variances for the previous month. No commentary on the variances is given and the production manager receives no other feedback on the efficiency of the Omega process. Calculate the material usage, material mix, and total material yield variances for the last month.
Kappa Co.
Kappa Co. produces Omega, an animal feed made by mixing and heating three ingredients: Alpha, Beta, and Gamma. The company uses a
Cost per Kg
KG Cost per Kg of omega
Alpha 40kg R2 R80
beta 60 kg R5 R300
gamma. 20kg R1 R20
120kg R 400
Additional notes
• The mixing and heating process is subject to a standard evaporation loss.
• Alpha, Beta, and Gamma are agricultural products, and their quality and price vary significantly fromyear to year. Standard prices are set at the average market price over the last five years. Kappa Co.has a purchasing manager who is responsible for pricing and supplier contracts.
• The standard mix is set by the finance department. The last time this was done was at the product
launch which was five years ago. It has not changed since.
Last month 4 600 kg of Omega was produced, using the following inputs:
KG Cost per Kg total Cost
Alpha 2200Kg R1.80 R3960
beta 2500kg R6.00 R15000
gamma. 920Kg R1.00 R920
5620kg R19880
At the end of each month, the production manager receives a standard cost operating statement from Kappa Co.’s performance manager. The statement contains material price and usage variances, labour rate and efficiency variances, and
Calculate the material usage, material mix, and total material yield variances for the last month.
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