Question

Direct materials usage variance, direct materials mix and yield variances: Vet-Pro, Inc. produces a veterinary grade anti-anxiety mixture for pets with behavioral problems. Two chemical solutions, Aranol and Lendyl, are mixed and heated to produce a chemical that is sold to companies that produce the anti-anxiety pills. The mixture is produced in batches and has the following standards:

Direct Material
Standard Mix
Standard Unit Price
Standard Cost
Aranol
2,000 gallons
$6.00 per gallon
$12,000
Lendyl
18,000
8.00
144,000
Total
20,000 gallons
$156,000
Yield
16,000 gallons
During March, the following actual production information was provided:
Direct Material
Actual Mix
Aranol
42,000 gallons
Lendyl
158,000
Total
200,000 gallons
Yield
166,000 gallons
Required:

Compute the direct materials mix and yield variances. In your computations, round the standard cost of the yield to 3 decimal places. Use the rounded number in the subsequent computations.

Answer 1

The question addresses variance analysis in the context of chemical manufacturing for calculating direct materials mix and yield variances. It underlines the importance of percent yield in controlling costs and minimizing waste in production processes. The practical applications of these concepts include ensuring the accuracy of pharmaceutical product dispensing.

Step-by-step explanation:

The question pertains to variance analysis, a crucial concept in managerial accounting that involves comparing actual outcomes to planned, or standard, outcomes. Specifically, it deals with the computation of direct materials mix and yield variances. The direct materials mix variance focuses on the relative proportion of different ingredients used in a mixture compared to the standard proportions. The yield variance measures the difference between the actual and the standard or expected yield of a production process, in terms of output quantity.

In chemical production and pharmaceutical manufacturing, percent yield is essential. Improving the percent yield can significantly reduce waste and expense, and is particularly important when numerous reactions are involved in the synthesis of complex chemicals, where a single step with low percent yield can lead to substantial inefficiencies. As for the practical application in industry, suppose a quality control chemist is evaluating the precision of machines dispensing cough syrup. Understanding the percent yield can help in assessing whether the machines are delivering the correct volume within acceptable variance thresholds.

In conclusion, while the provided information does not include the exact data to calculate the variances for Vet-Pro, Inc.'s anti-anxiety mixture, understanding the concepts of materials mix variance and yield variance is pivotal for functional quality control and cost management in any chemical production process.