Cost Accounting (14th Edition)

528 CHAPTER 14 COST ALLOCATION, CUSTOMER-PROFITABILITY ANALYSIS, AND SALES-VARIANCE ANALYSIS
Direct Materials Yield Variance
The direct materials yield variance is the sum of the direct materials yield variances for each input:
Actual total
Direct
quantity of
materials
= • all direct
yield variance
materials
for each input
inputs used
-
Budgeted total
quantity of all
direct materials μ *
inputs allowed
for actual output
Budgeted
direct materials
*
input mix
percentage
Budgeted
price of
direct materials
input
The direct materials yield variances are as follows:
Latoms: (6,500 – 6,400) tons * 0.50 * $70 per ton = 100 * 0.50 * $70 = $3,500 U
Caltoms: (6,500 – 6,400) tons * 0.30 * $80 per ton = 100 * 0.30 * $80 = 2,400 U
Flotoms: (6,500 – 6,400) tons * 0.20 * $90 per ton = 100 * 0.20 * $90 = ƒ1,800 U
Total direct materials yield variance
$7,700 U
The total direct materials yield variance is unfavorable because Delpino used 6,500 tons of tomatoes rather than the
6,400 tons that it should have used to produce 4,000 tons of ketchup. Holding the budgeted mix and budgeted
prices of tomatoes constant, the budgeted cost per ton of tomatoes in the budgeted mix is $77 per ton. The unfavorable
yield variance represents the budgeted cost of using 100 more tons of tomatoes, (6,500 – 6,400) tons * $77 per
ton = $7,700 U. Delpino would want to investigate reasons for this unfavorable yield variance. For example, did the
substitution of the cheaper Caltoms for Flotoms that resulted in the favorable mix variance also cause the unfavorable
yield variance?
The direct materials variances computed in Exhibits 14-12 and 14-13 can be summarized as follows:
Level 2
Flexible-Budget
Direct Materials Variance
$14,850 U
Level 3
Direct Materials
Price Variance
$10,400 U
Direct Materials
Efficiency Variance
$4,450 U
Level 4
Direct Materials
Mix Variance
$3,250 F
Direct Materials
Yield Variance
$7,700 U
Terms to Learn
This chapter and the Glossary at the end of the book contain definitions of the following important terms:
composite unit (p. 521)
customer-cost hierarchy (p. 511)
customer-profitability analysis (p. 510)
direct materials mix variance (p. 527)
direct materials yield variance (p. 527)
homogeneous cost pool (p. 509)
price discount (p. 511)
sales-mix variance (p. 521)
sales-quantity variance (p. 521)
whale curve (p. 516)