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

Zenith Ltd makes a liquid blend. The standard mix is 3 kg of Material A at $4 per kg and 2 kg of Material B at $6 per kg. This 5 kg of input should produce 4 kg of output. Last month 10,000 kg of material was input (in the standard mix) and 7,600 kg of output was achieved. What is the material yield variance?

The yield variance is $2,400 adverse. Input of 10,000 kg should give 8,000 kg of output but gave only 7,600 kg. The 400 kg shortfall is valued at the standard cost of $6 per kg of output, which gives an adverse variance.

  1. A$2,400 adverseCorrect
  2. B$2,400 favourable
  3. C$1,920 adverse
  4. D$3,000 adverse

Explanation

Standard output from 10,000 kg of input is 10,000 × 4/5 = 8,000 kg. Standard cost per kg of output is $24 / 4 = $6. Yield variance = (7,600 − 8,000) × $6 = $2,400 adverse. Check: standard input for 7,600 kg is 9,500 kg, so 500 kg excess × $4.80 = $2,400. Using $4.80 on the 400 kg output shortfall gives $1,920, which mixes the input and output bases.

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