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

Dalton Ltd has a standard material cost of $4 per kg of output, with a standard yield of 80% of input. In May, 25,000 kg of material was input and the material yield variance was $3,000 adverse. What was the actual output?

Actual output was 19,250 kg. The input of 25,000 kg should give 20,000 kg at the 80% standard yield. The adverse variance of $3,000 divided by $4 per kg is a 750 kg shortfall, which is deducted from standard output.

  1. A19,250 kgCorrect
  2. B20,750 kg
  3. C19,000 kg
  4. D20,000 kg

Explanation

Standard output from 25,000 kg of input is 25,000 × 80% = 20,000 kg. An adverse variance of $3,000 at $4 per kg means a shortfall of 750 kg. Actual output is therefore 20,000 − 750 = 19,250 kg. Adding the shortfall (20,750 kg) would reverse the sign of the variance.

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