Question

Calculating the Yield Variance

Mangia Pizza Company makes frozen pizzas that are sold through grocery stores. Mangia developed the following standard mix for spreading on premade pizza shells to produce 16 giant-size sausage pizzas.

Direct Material	Mix		Mix Proportion			SP			Standard Cost
Tomato sauce	10	lbs.		0.330			$1.50			$15.00
Cheese	11			0.370			2.70			29.70
Sausage	9			0.300			2.10			18.90
Total	30	lbs.								$63.60

Mangia put a batch of 2,000 pounds of direct materials (enough for 1,067 frozen sausage pizzas) into process. Of the total, 620 pounds were tomato sauce, 820 pounds were cheese, and the remaining 560 pounds were sausage. The actual yield was 770 pizzas.

Required:

1. Calculate the yield ratio based on the standard amounts given. If required, round your answer to two decimal places.

2. Calculate the standard cost per pound of the yield. If required, round your answer to the nearest cent.
$ per pizza

3. Calculate the standard yield for actual input of 2,000 pounds of direct materials. Do not round intermediate calculations. Round your final answer to nearest whole number.
pizzas

4. Calculate the yield variance. Do not round intermediate calculations, except for number of pizzas which should be rounded to nearest whole number. If required, round your final answer to the nearest cent.
$  

5. What if the total 2,000 pounds of direct materials put into process resulted in a yield of 1,092 pizzas? How would that affect the yield variance?

The yield variance would be .

Answer 1

1. Yield Ratio is defined as the ratio between Standard quantity for actual output and Revised actual quantity for Actual output. Alternatively, it is also the ratio between Actual output with actual inputs and standard output with actual inputs.

Actual output with actual inputs= 770 pizzas
Standard output with actual inputs= 1,067 pizzas
Yield ratio = 770/1067 = 0.72

2. Standard cost per pound of yield- The question has not been stated correctly. It has been solved on the requirement of standard cost per unit of yield rather than the pound of yield.

The standard cost for 16 Pizzas- $63.60
Hence standard cost per pizza = $63.60/16 = $3.98 per pizza

<If we assume no material weight loss during the making of pizza, the standard cost per pound of the yield will be $3.98/30 = $0.13. However, the cost per unit of yield is a more appropriate calculation.>

3. Standard Yield for actual input of 2,000 lbs
Since as per standard, 30 lbs of input produces 16 pizzas, the standard yield for actual input of 2,000 lbs will be - (2,000/30) * 16 = 1,067 Pizzas

4. Yield variance is the difference between (Standard Quantity for actual output * Standard price) and (Revised Actual Quantity * Standard price)

Standard Quantity for actual output-
Tomato Sauce= (10/16)*770 = 481.25lbs
Cheese= (11/16)*770= 529.38lbs
Sausage= (9/16)*770=433.13lbs

Revised Actual Quantity-
Total input of 200lbs divided in the standard ratio of 10:11:9
Tomato Sauce= 10/30 * 2,000 = 666.67lbs
Cheese= 11/30 * 2,000 = 733.33lbs
Sausage= 9/30 * 2,000 = 600lbs

Yield Variance

Material	SQ * SP (1)	RAQ * SP (2)	Variance (1-2)
Tomato Sauce	481.25*1.5 =$721.88	666.67*1.5 =$1,000	$278.13 (U)
Cheese	529.38*2.7 = $1,429.31	733.33*2.7 =$1,980	$550.69 (U)
Sausage	433.13*2.1 =$909.56	600*2.1 =$1,260	$350.44 (U)
Total	$3,060.75	$4,240	$1,179.25 (U)

5. If the output was 1,092 pizzas instead of the standard of 1,067 pizzas, the yield variance would be favourable.

Standard Quantiy

Tomato Sauce	682.50lbs
Cheese	750.75lbs
Sausages	614.25lbs

Materials	SQxSP	RAQxSP	Variance
Tomato Sauce	$       1,023.75	$       1,000.00	$          23.75
Cheese	$       2,027.03	$       1,980.00	$          47.03
Sausages	$       1,289.93	$       1,260.00	$          29.93
Total	$       4,340.70	$       4,240.00	$       100.70