Section B - Case 2: Verdant Yields
Verdant Yields produces organic liquid fertilizer by blending two materials: Nitrogen-rich (N) and Phosphorus-rich (P).
Standard data to produce 10 liters of fertilizer:
Material N: 8 liters at $5 per liter
Material P: 4 liters at $10 per liter
(Total standard input = 12 liters. Standard cost = $80).
Actual data for the month:
Output produced: 950 liters of fertilizer.
Material N purchased and used: 840 liters at $4.80 per liter.
Material P purchased and used: 360 liters at $10.50 per liter.
What is the Total Material Price Variance for the month?
ACCA · Question 24 · Budgeting and Control
Section B - Case 2: Verdant Yields
The production manager at Verdant Yields is reviewing the variances. The Mix Variance is Favorable, but the Yield Variance is Adverse.
Which TWO of the following are valid interpretations of this combination of variances?
Answer options:
The manager substituted the more expensive Material P with the cheaper Material N.
The cheaper material mix resulted in greater wastage or evaporation during the blending process.
The purchasing department negotiated better prices for both materials.
The production team worked faster than the standard time allowed.
32 questions · hints · full answers · grading
Expert