CTRL+F to clear any blur Direct Materials Usage Variances: Direct Materials Mix and...

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Direct Materials Usage Variances: Direct Materials Mix and Yield Variances Energy Products Company produces a gasoline additive, Gas Gain. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process. Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. If the controls are not effective, there can be a loss of output and efficiency. The standard cost of producing a 500-liter batch of Gas Gain is $135.00. The standard direct materials mix and related standard cost of each chemical used in a 500-liter batch are as follows: Chemical Mix SP Standard Cost Echol 200 liters $0.200 $40.00 Protex 100 0.425 42.50 Benz 250 0.150 37.50 CT-40 50 0.300 15.00 Total 600 liters $135.00 The quantities of chemicals purchased and used during the current production period are shown in the following schedule. A total of 200 batches of Gas Gain were manufactured during the current production period. Energy Products determines its cost and chemical usage variations at the end of each production period. Chemical Quantity Used Echol 38,000 liters Protex 18,400 Benz 54,000 CT-40 10,200 Total 120,600 liters Required: Compute the total direct materials usage variance, and then break down this variance into its mix and yield components. Do not round intermediate computations and round final answers to the nearest cent. (CMA adapted) Usage variance Favorable Mix variance Favorable Yield variance Unfavorable

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