Pinnuck Products makes a liquid solvent using two grades of petroleum (Grade-1 and Grade-2). Within certain limits, the two grades can substitute for one another, so the actual mix of inputs often differs from the standard mix. The standard cost of a unit of output follows. Input Grade Grade-1 Grade-2 Input Grade Grade-1 Grade-2 8,000 units were produced during August. The actual inputs purchased and used during August were as follows. Cost per Unit $7.90 36.20 Quantity 1.2 units 0.8 units Input Grade Grade-1 Grade 2 Total Total Quantity 10,000 units 6,200 units Required: Prepare a complete materials variance analysis show the material price variance, the materials efficiency variance, the material mix variance, and the material yield variance. (Do not round intermediate calculations. Round "Standard mix values" to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Cost per Unit $8.00 $6.00 Mix Variance Direct Material Yield Variance Efficiency Variance Purchase Price Variance
Pinnuck Products makes a liquid solvent using two grades of petroleum (Grade-1 and Grade-2). Within certain limits, the two grades can substitute for one another, so the actual mix of inputs often differs from the standard mix. The standard cost of a unit of output follows. Input Grade Grade-1 Grade-2 Input Grade Grade-1 Grade-2 8,000 units were produced during August. The actual inputs purchased and used during August were as follows. Cost per Unit $7.90 36.20 Quantity 1.2 units 0.8 units Input Grade Grade-1 Grade 2 Total Total Quantity 10,000 units 6,200 units Required: Prepare a complete materials variance analysis show the material price variance, the materials efficiency variance, the material mix variance, and the material yield variance. (Do not round intermediate calculations. Round "Standard mix values" to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Cost per Unit $8.00 $6.00 Mix Variance Direct Material Yield Variance Efficiency Variance Purchase Price Variance
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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Transcribed Image Text:Pinnuck Products makes a liquid solvent using two grades of petroleum (Grade-1 and Grade-2). Within certain limits, the two grades
can substitute for one another, so the actual mix of inputs often differs from the standard mix. The standard cost of a unit of output
follows.
Input Grade
Grade-1
Grade-2
Input Grade
Grade-1
Grade-2
8,000 units were produced during August. The actual inputs purchased and used during August were as follows.
Cost per
Unit
$7.90
$6.20
Quantity
1.2 units
0.8 units
Input Grade
Grade-1
Grade 2
Total
Total Quantity
10,000 units
6,200 units
Required:
Prepare a complete materials variance analysis show the material price variance, the materials efficiency variance, the material mix
variance, and the material yield variance. (Do not round intermediate calculations. Round "Standard mix values" to 2 decimal
places. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select
either option.)
Cost per Unit
$8.00
$6.00
Mix Variance
Direct Material
Yield Variance
Efficiency Variance
Purchase Price Variance
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