Problem 17-52 (Algo) Materials Mix and Yield Variances (LO 17-5) 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 Quantity Cost per Unit Grade-1 1.2 units $ 8.95 Grade-2 0.8 units $ 6.95 12,600 units were produced during August. The actual inputs purchased and used during August were as follows. Input Grade Total Quantity Cost per Unit Grade-1 19,500 units $ 8.85 Grade-2 10,000 units $ 7.15 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.)
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.
Problem 17-52 (Algo) Materials Mix and Yield Variances (LO 17-5)
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 | Quantity | Cost per Unit | ||||||
| Grade-1 | 1.2 | units | $ | 8.95 | ||||
| Grade-2 | 0.8 | units | $ | 6.95 | ||||
12,600 units were produced during August. The actual inputs purchased and used during August were as follows.
| Input Grade | Total Quantity | Cost per Unit | ||||||
| Grade-1 | 19,500 | units | $ | 8.85 | ||||
| Grade-2 | 10,000 | units | $ | 7.15 | ||||
Required:
Prepare a complete materials
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