A Company Makes a Product Using Two Materials, One of Which

question 94

Multiple Choice

A company makes a product using two materials, one of which is interchangeable with a third material. The standards for producing one 200-pound batch are presented below. The last 200-pound batch was produced using 140 pounds of M and 90 pounds of O. The price of M was $0.03 per pound and the actual price of O was $0.10.
$$\begin{array} { l c c c } & \text { Standard Quartity } & \text { Standard } & \\\text { Material } & ( \mathrm { Ibs } ) & \text { Cost/lb. } & \text { Total Cost } \\\mathrm { O } & 0 & \$ 0.10 & \$ 0 \\\mathrm { H } & 80 & 0.08 & 6.40 \\\mathrm { M } & \underline{120} & 0.02 & \underline{ 2.40} \\& \underline{200} & & \underline{ \$ 8.80}\end{array}$$

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Is the material yield variance favorable or unfavorable?

• A) Favorable.
• B) Unfavorable.

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