Question

Eco Strip Inc. makes a paint remover which is made up of two direct materials, X and Y. The standard costs and standard quantities are as follows. Each gallon of paint remover requires 0.3 gallons at $4.00 per gallon of material X and 0.7 gallons at $6.00 per gallon of material Y. During April, Eco Strip produced 50,000 gallons of paint remover, used 17,000 gallons at $4.25 per gallon of material X, and used 38,000 gallons at $5.90 per gallon of material Y. What are the mix and yield variances for material X for the month of April?
a. $2,000 U; $6,000 U.
b. $3,000 U; $5,000 U.
c. $10,000 U; $2,000 F.
d. $10,000 F; $18,000 U.
e. None of these.

Answer 1

Answer:

a. $2,000 U; $6,000 U

Explanation:

Material Mix Variance for X = (Actual Usage in standard proportions - Actual Usage in Actual Proportions) * Standard Price per unit

= ((55000*0.3) - 17000) * $4

= $2,000 Unfavorable

Material Yield Variance for X = (Expected input units in standard proportions - Input units based on Actual output) * Standard Price per unit

= ((55000*0.3) - (50000*0.3)) * $4

= $6,000 Unfavorable