Chapter 7, Problem 7.40P

Direct materials efficiency, mix, and yield variances. Sandy’s Snacks produces snack mixes for the gourmet and natural foods market. Its most popular product is Tempting Trail Mix, a mixture of peanuts, dried cranberries, and chocolate pieces. For each batch, the budgeted quantities and budgeted prices are as follows:

	Quantity per Batch	Price per Cup
Peanuts	60 cups	$1
Dried cranberries	30 cups	$2
Chocolate pieces	10 cups	$3

Small changes to the standard mix of direct materials reflected in the above quantities do not significantly affect the overall end product. In addition, not all ingredients added to production end up in the finished product, as some are rejected during inspection.

In the current period, Sandy’s Snacks made 100 batches of Tempting Trail Mix with the following actual quantity, cost, and mix of inputs:

1. 1. What is the budgeted cost of direct materials for the 100 batches?

  Required

1. 2. Calculate the total direct materials efficiency variance.
2. 3. Calculate the total direct materials mix and yield variances.
3. 4. How do the variances calculated in requirement 3 relate to those calculated in requirement 2? What do the variances calculated in requirement 3 tell you about the 100 batches produced this period? Are the variances large enough to investigate?