- 10 Marks
MA – L2 – Q23 – Advanced Variance Analysis
Calculate total materials cost variance for Tamale Chemicals and analyze into price, usage, yield, and mix components for GreenLube production.
Question
Tamale Chemicals, based in Tamale, has the following standard cost for producing 9 litres of GreenLube:
- 5 litres of Material X at GH₵0.70 per litre
- 5 litres of Material Y at GH₵0.92 per litre.
There are no inventories of materials, and all material price variances relate to materials used. Actual results showed that 100,000 litres of materials were used during a particular period as follows:
- 45,000 litres of Material X: cost GH₵36,000
- 55,000 litres of Material Y: cost GH₵53,350
During the period, 92,070 litres of GreenLube were produced.
Required:
Calculate the total materials cost variance and analyse it into its price, usage, yield, and mix components.
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