Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher

Exercise 22

Materials Mix and Yield Variances
Houston Corporation manufactures a wide variety of chemical compounds and liquids for industrial uses. The standard mix for producing a single batch of 1,000 liters of Rust-Off is as follows:

There is a 20 percent loss in liquid volume during processing due to evaporation. The finished liquid is put into 5-liter bottles for sale. Thus, the standard material cost for a 5-liter bottle is $52.
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):

A total of 16,000 bottles (80,000 liters) 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. Materials price and efficiency variances.
b. Materials mix and yield variances.