Soft Smells Ltd makes a range of different liquid fragrances which are used to give a pleasant aroma to rooms in a house over a long period of time. One of its products, Spring Flower, has the following standard cost card: For the production of 15 litres of Spring Flower: £ Honeysuckle extract 4 litres @ £2 per litre = 8 Essence of bluebell 8 litres @ £6 per litre = 48 Lavender water 4 litres @ £3 per litre = 12 Wisteria concentrate 2 litres @ £2 per litre = 4 Total 72 Last month, the company produced 5,700 litres of Spring Flower and used the following: £ Honeysuckle extract 1,600 litres for 2,880 Essence of bluebell 2,700 litres for 17,010 Lavender water 1,600 litres for 4,480 Wisteria concentrate 1,120 litres for 1,680 Calculate the individual material price and usage variances; then calculate the material mix and yield variances and comment on the company’s production strategy
Soft Smells
Soft Smells Ltd makes a range of different liquid fragrances which are used to give a pleasant aroma to rooms in a house over a long period of time. One of its products, Spring Flower, has the following
|
For the production of 15 litres of Spring Flower: |
£ |
|||
|
Honeysuckle extract |
4 litres @ £2 per litre = |
8 |
|
|
|
Essence of bluebell |
8 litres @ £6 per litre = |
48 |
|
|
|
Lavender water |
4 litres @ £3 per litre = |
12 |
|
|
|
Wisteria concentrate |
2 litres @ £2 per litre = |
4 |
|
|
|
Total |
72 |
|
||
Last month, the company produced 5,700 litres of Spring Flower and used the following:
|
|
£ |
|||
|
Honeysuckle extract |
1,600 litres for |
2,880 |
|
|
|
Essence of bluebell |
2,700 litres for |
17,010 |
|
|
|
Lavender water |
1,600 litres for |
4,480 |
|
|
|
Wisteria concentrate |
1,120 litres for |
1,680 |
|
|
Calculate the individual material price and usage variances; then calculate the material mix and yield variances and comment on the company’s production strategy.
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