Reference no: EM133141535

Question - Mammoth Breweries is a local microbrewery that makes a single kind of beer.  One of the main raw materials needed in the brewing process is Hops.  During the year, Mammoth changed the mix of Low quality and High quality Hops in their brewing process.

Budgeted cost for a standard barrel is as follows:

	Amount (in kg)	Price per kg
Low Quality	10kg	$4.00
High Quality	15kg	$5.00

 

	Amount Purchased	Price paid	Amount used
Low Quality	130,000 kg	$3.98/kg	124,138 kg
High Quality	240,000kg	$4.80/kg	230,542 kg

Actual production was 15,000 barrels - this was 2,000 barrels less than planned.

Required -

1. Calculate the Direct Material Quantity (Efficiency) Variances?

2. Calculate the Direct Material Mix Variances?

3. Calculate the Direct Material Yield Variances?

4. Identify and briefly discuss at least two qualitative factors that should be considered.

5. Was it a good decision to change the mix?