Problem:
Tropical Fruits, Inc. processes tropical fruit into fruit salad mix, which it sells to a food-service company. Tropical Fruits has in its budget the following standards for the direct materials inputs to produce a batch of 80 kilograms of tropical fruit salad: 50 kilograms of pineapple at $1.00 per kilogram; 30 kilograms of watermelons at $0.50 per kilogram; 20 kilograms of strawberries at $0.75 per kilogram.
Note that 100 kilograms of input quantities are required to produce 80 kilograms of fruit salad. No inventories of direct materials are kept. Purchases are made as needed, so all price variances are related to direct materials used. The actual direct materials inputs used to produce 54,000 kilograms of tropical fruit salad for October were:
36,400 kilograms of pineapple at $0.90 per kilogram $32,760
18,200 kilograms of watermelon at $0.60 per kilogram 10,920
15,400 kilograms of strawberries at $0.70 per kilogram 10,780
Required:
1. Compute the total direct materials price and efficiency variances in October.
2. Compute the total direct materials mix and yield variances for October.
3. Comment on your results in requirements 1 and 2.