Two or More Materials :: Miscllaneous Advanced : Problems and Solutions

Problem 1

Raw materials 'X' costing 100 per kilogram and 'Y' costing 60 per kilogram are mixed in equal proportions for making product 'A'. The loss of materials in processing works out to 25% of the output. The production expenses are allocated at 50% if direct material cost. The end product is priced with a margin of 33 1/3 over the total cost. Material 'Y' is not easily available and substitute raw material 'Z' has been found for 'Y' costing 50 per kilogram. It is required to keep the proportion of this substitute material in the mixture as low as possible and at the same time maintain the selling price of the end product at existing levels and ensure the same quantum of profit as at present
You are required:
To compute what should be the ratio of mix of the raw materials X and Z.


Problem 2

'X' Ltd. Is producing floor covers in roll of standard size measuring 3 meters wide and 30 meters long by feeding raw materials to a continuous process machine. Standard mixture fixed for a batch of 900 sq.meters of floor cover is as follows:
2,000 kg of material A at Re.1.00/kg
800 kg of material B at Re.1,50/kg
20 gallons of material C at 30/gallon.

During the period, 1505 standard size rolls were produced from the material issued of 150 batches. The actual usage and the cost of materials were:

3,00,500 kg of material A at 1.10/kg
1,19,600 kg of material B at 1.65/kg
3,100 gallon of material C at 29.50 gallon
Present the figures to management showing the break up of material cost variances arising during the period.


Problem 3

A company, manufacturing a special type of facing tile 12''x8''1/2'', uses a system of standard costing. The standard mix of the compound used for making the tiles is
1,200 kg. Material A @ Re.0.30 per kg
500 kg. Material B @ Re.0.60 per kg
800 kg. Material C @ Re.0.70 per kg
The compound should produce 12,000 square feet of tiles of '' thickness. During a period in which 1,00,000 tiles of the standard size were produced, the material usage was:
7,000 Material A @ Re.0.32 per kg. = 2,240
3,000 Material B @ Re.0.65 per kg. = 1,950
5,000 Material C @ Re.0.75 per kg. = 3,750
15,000 Total 7,940
present the cost figure for the period showing


Problem 4

Modern tiles Ltd. Makes plastic tiles of standard size of 6" x 6" x 1/the following information you are required to calculate for direct materials:
(i) cost variance in total:
(ii) cost variance sub-divided into (a) price and (b) usage
(iii) the usage variance analysed to show: (a) mix and (b) yield
A standard mix of the compound required to produce an output of 20,000 square feet of tiles 1/8" thick is as below:
Direct Material Quantity (kg) Price ( per kg.)
A 600 0.90
B 400 0.65
C 500 0.40
During December 1993 eight mixes were processed and actual materials consumed were:
Direct Material Quantity (kg) Price ( per kg)
A 5,000 0.85
B 2,900 0.60
C 4,400 0.45
Actual prodution for December was 6,20,000 tiles.


Problem 5

A foundry producing casting of a standard alloys uses standard costing system. The standard mixture is as follows:

40% of material of A @ 300 per tonne
30% of material of B @ 100 per tonne
10% of material of C @ 420 per tonne
20% scrap metal of this alloy.

It is expected that from each charge, there will be 5% loss in melt, 35% will be returned to scrap stock (runners and headers etc.) and 60% will be good casting. Scrap is credited and charged at the standard average cost of the metal mixture. In a certain period, the following materials are purchased and used;

380 tonnes material A @ 310 per tonne
330 tonnes material B @ 110 per tonne
90 tonnes material C @ 420 per tonne
200 tonnes scrap metal at standard price
From this material, 608 tonnes of goods casting are produced and 340 tonnes of scrap metal are returned to the scrap metal stock
Prepare information for management showing standard metal cost, and variances from standard in respect of this period.


Practice Problems

Author : The Edifier