Question:
DIRECT MATERIALS USAGE VARIANCE, DIRECT MATERIALS MIX AND YIELD VARIANCES
Limpio, Inc., produces a key ingredient for liquid laundry detergents. Two chemical solutions, Chem A and Chem B, are mixed and heated to produce a cleansing chemical that is sold to companies that produce liquid detergents. The cleansing ingredient is produced in batches and has the following standards:
|
Direct Material
|
Standard Mix
|
Standard Unit Price
|
Standard Cost
|
|
|
Chem A
|
15,000 gallons
|
$2.00 per gallon
|
$30,000
|
|
|
Chem B
|
5,000
|
3.00
|
15,000
|
|
|
Total
|
20,000 gallons
|
|
$45,000
|
|
|
Yield
|
15,000 gallons
|
|
|
|
During March, the following actual production information was provided:
|
Direct Material
|
Actual Mix
|
|
|
Chem A
|
140,000 gallons
|
|
|
Chem B
|
60,000
|
|
|
Total
|
200,000 gallons
|
|
|
Yield
|
158,400 gallons
|
|
Required:
1. Compute the direct materials mix and yield variances.
2. Compute the total direct materials usage variance for Chem A and Chem B. Show that the total direct materials usage variance is equal to the sum of the direct materials mix and yield variances.