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

question 57

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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Is the total direct material yield variance favorable or unfavorable?

• A) Favorable.
• B) Unfavorable.

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Definitions:

Accrual Basis

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when the cash transactions occur.

Income

The money received, especially on a regular basis, for work or through investments.

Depreciation Expense

Segmenting the cost related to a physical asset through its active life.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was acquired, representing how much of the asset's value has been used up.