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CMA Final · Strategic Cost Management · Variance Analyses

A chemical unit's standard input for 4 kg of output is 3 kg of X at Rs 20 per kg and 2 kg of Y at Rs 30 per kg. In a month it used 620 kg of X and 380 kg of Y and obtained 780 kg of output. What is the material yield variance?

The material yield variance is Rs 600 Adverse. For 780 kg of output the standard input cost is Rs 23,400, whereas 1,000 kg of input at standard mix costs Rs 24,000, so the unit got less output than standard from its input.

  1. ARs 600 AdverseCorrect
  2. BRs 600 Favourable
  3. CRs 200 Favourable
  4. DRs 400 Adverse

Explanation

Standard input for 780 kg output = 780 x 5/4 = 975 kg, in the 3:2 ratio = 585 kg X and 390 kg Y, costing 11,700 + 11,700 = Rs 23,400. Actual input of 1,000 kg at the standard mix costs 600x20 + 400x30 = Rs 24,000. Yield variance = 23,400 - 24,000 = Rs 600 Adverse. Mix variance is Rs 200 Favourable (24,000 - 23,800), so Rs 400 Adverse is the combined usage variance, not yield.

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