The Shum Company Makes a Product, Z, from Two Materials

question 104

Multiple Choice

The Shum Company makes a product, Z, from two materials: X and Y. The standard prices and quantities are as follows:
$\begin{array}{lrr} &\text { X } & \text {Y } \\ \text { Price per pound} &\$6&\$9\\ \text { Pounds per unit of product \( Z \) } &10&5\\\end{array}$

In May, 21,000 units of Z were produced by Shum Company, with the following actual prices and quantities of materials used:
$\begin{array}{lrr} &\text { X } & \text { Y } \\ \text { Price per pound } &\$5.70&\$8.40\\ \text { Pounds used } &216,000&114,000\\\end{array}$

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What is the total direct materials mix variance for May?

• A) $12,000.
• B) $24,000.
• C) $36,000.
• D) $60,000.

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Definitions:

Operating Activities

Cash flows directly related to earning income, including day-to-day transactions like selling products and paying wages.

Financing Activities

Transactions that result in changes in the size and composition of the equity capital or borrowings of the entity, as reported in a company’s cash flow statement.

Non-current Liability

Liabilities that are not due within the next twelve months, such as long-term loans, bonds payable, and deferred tax liabilities.

Short-term Loans

Loans scheduled to be repaid in less than a year, typically used for immediate cash flow needs or small-scale expenses.