The Becton Enterprises (BE) Produces a Gasoline Additive, Charger Power

question 126

Multiple Choice

The Becton Enterprises (BE) produces a gasoline additive, Charger Power. 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. Loss of output and efficiency may result if the controls are not effective.
The standard cost of producing a 500-liter batch of Charger Power is $135. The standard materials mix and related standard cost of each chemical used in a 500-liter batch are: $\begin{array}{lrrr}\text{ Chemical }&\text{ Std input quantity} & \text{Std cost per liter} &\text{ Total cost } \\\text{Echol }& 200 &\$ 0.200 &\$ 40.00 \\\text{ Protex} & 100 & 0.425 & 42.50 \\\text{Benz} & 250 & 0.150 & 37.50 \\\text{ CT -40 }& \underline{50 }& 0.300 & \underline{15.00 }\\ & \underline{ 600} & & \underline{\$ 135.00} \\\end{array}$


The quantities of chemicals purchased and used during the current production period are shown in the schedule below. A total of 140 batches of Charger Power were manufactured during the current production period. The controller of BE has determined its costs and chemical usage variations at the end of the production period. $$\begin{array} { l r r r r } \text { Chemical } & \text { Quantity Purchased } & { \text { Total Cost } } & \text { Quantity Used } \\\text { Echol } & 25,000 & \$ 5,365 & 26,600 \\\text { Protex } & 13,000 & 6,240 & 12,880 \\\text { Benz } & 40,000 & 5,840 & 37,800 \\\text { CT-40 } & \underline{7,500} &2,220 & \underline{ 7,140} \\ & \underline{85,500} && \underline{84,420} \\ & & &\end{array}$$
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Is the material mix variance favorable or unfavorable?

• A) Favorable.
• B) Unfavorable.

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