问答题
The Safe Soap Co makes environmentally-friendly soap using three basic ingredients. The standard cost card for one batch of soap for the month of September was as follows:
问答题
(a) Calculate the total material mix variance and the total material yield variance for September.(8 marks)
【正确答案】
【答案解析】
问答题
(b)In October the materials mix and yield variances were as follows:
Mix: $6,000 adverse
Yield: $10,000 favourable
The production manager is pleased with the results overall, stating:
‘At the beginning of September I made some changes to the mix of ingredients used for the soaps. As I expected,the mix variance is adverse in both months because we haven’t yet updated our standard cost card but, in both months, the favourable yield variance more than makes up for this. Overall, I think we can be satisfied that the changes made to the product mix are producing good results and now we are able to produce more batches and meet the growing demand for our product.’
The sales manager, however, holds a different view and says:
‘I’m not happy with this change in the ingredients mix. I’ve had to explain to the board why the sales volume variance for October was $22,000 adverse. I’ve tried to explain that the quality of the soap has declined slightly and some of my customers have realised this and simply aren’t happy but no-one seems to be listening. Some customers are even demanding that the price of the soap be reduced and threatening to go elsewhere if the problem isn’t sorted out.’
Required:
(i) Briefly explain what the adverse materials mix and favourable materials yield variances indicate about production at Safe Soap Co in October.
Note: You are NOT required to discuss revision of standards or operational and planning variances.(4 marks)
(ii) Discuss whether the sales manager could be justified in claiming that the change in the materials mix has caused an adverse sales volume variance in October.(3 marks)
【正确答案】 (i)
A materials mix variance will occur when the actual mix of materials used in production is different from the standard mix. So, it is inputs which are being considered. Since the total mix variance is adverse for the Safe Soap Co, this means that the actual mix used in September and October was more expensive than the standard mix.
A material yield variance arises because the output which was achieved is different from the output which would have been expected from the inputs. So, whereas the mix variance focuses on inputs, the yield variance focuses on outputs.In both September and October, the yield variance was favourable, meaning that the inputs produced a higher level of
output than one would have expected.
(ii)
Whilst the mix and yield variances provide Safe Soap Co with a certain level of information, they do not necessarily explain any quality issues which arise because of the change in mix. The consequences of the change may well have an impact on sales volumes. In Safe Soap Co’s case, the sales volume variance is adverse, meaning that sales volumes have fallen in October. It is not known whether they also fell in September but it would be usual for the effects on sales of the change in mix to be slightly delayed, in this case by one month, given that it is only once the customers start
receiving the slightly altered soap that they may start expressing their dissatisfaction with the product.
There may also be other reasons for the adverse sales volume variance but given the customer complaints which have been received, the sales manager’s views should be taken on board.
【答案解析】