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ACCA Applied Skills · Performance Management · Material mix and yield variances

Brandt Co blends two liquids. The standard batch is 40 litres of X at $2.50 per litre and 60 litres of Y at $1.50 per litre, giving a standard output of 95 litres. In April, 50,000 litres were input in the standard proportions and 46,500 litres of output were produced. What is the material yield variance?

The variance is $2,000 adverse. Input of 50,000 litres should yield 47,500 litres, but only 46,500 were produced. The 1,000 litre shortfall is valued at the standard cost of $2 per litre of output ($190 divided by 95 litres).

  1. A$2,000 adverseCorrect
  2. B$2,000 favourable
  3. C$1,900 adverse
  4. D$2,500 adverse

Explanation

Standard batch cost is 100 + 90 = $190, so standard cost per litre of output is 190 / 95 = $2. Standard output from 50,000 litres is 50,000 × 95/100 = 47,500 litres. Yield variance = (46,500 − 47,500) × $2 = $2,000 adverse. Using $1.90 per litre of input applies the input cost to an output shortfall, which is wrong.

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