McKinney Solvents produces a wide variety products for the manufacturing industry. The standard mix for producing a single batch of
100 gallons of its biggest selling product is as follows:
Input Chemical Quantity (in gallons) Cost (per gallon) Total Cost
X-1 22.5 $ 84 $ 1.890
X-2 40 59 2,360
X-3 62.5 50 3.125
125 $ 7,375
There is a standard 20 percent loss in liquid volume during processing due to evaporation. The finished liquid is put into 10-gallon
containers for sale. Thus, the standard material cost for a 10-gallon container is $737.50 [= ($7,375 ÷ 100 gallons) × 10 gallons per
container].
The actual quantities of direct materials and the cost of the materials placed in production during March were as follows (materials are
purchased and used at the same time):
Input Chemical Quantity (in gallons) Total Cost
X-1 13,050 $ 937,800
X-2 20,250 1,259,700
X-3 30,750 1,657,000
64,050 $ 3,854,500
A total of 5,170 containers (51,700 gallons) were produced during March.
Required:
Calculate the total direct material variance for the liquid product for the month of March and then further analyze the total variance
into:
a. and b. Materials price and efficiency variances and materials mix and yield variances.
Note: Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for
unfavorable. If there is no effect, do not select either option.
Answer is complete but not entirely correct.
Direct Material
Input Chemical Mix Variance Yield Variance Efficiency Variance Purchase Price Variance
X-1 $ 11,335 U $ 127,575 U $ 1,118,230 U $ 158,574 U
X-2 11,335 U 330,400 U 25,370 F 65,342 F
X-3 11,335 U 48,031 U 78,125 F 119,990 F
Total $ 11,335 U $ 939,007 U $ 14,735 U $ 26,758 F
