The Safe Soap Co makes environmentally-friendly soap using three basic ingredients. The standard cost card for one batch of soap for the month of September was as follows:

The budget for production and sales in September was 120 000 batches. Actual production and sales were 136 000 batches.The actual ingredients used were as follows:

Material .......................KilogramsLye ...............................34 080Coconut oil ...................83 232Shea butter ..................64 200

Required:(a) Calculate the total material mix variance and the total material yield variance for September.(b) In October the materials mix and yield variances were as follows:Mix: $6 000 adverseYield: $10 000 favourableThe production manager is pleased with the results overall, stating:?At the beginning of September I made some changes to the mix of ingredients used for the soaps. As I expected, the mix variance is adverse in both months because we haven?t yet updated our standard cost card but, in both months, the favourable yield variance more than makes up for this. Overall, I think we can be satisfied that the changes made to the product mix are producing good results and now we are able to produce more batches and meet the growing demand for our product.?

The sales manager, however, holds a different view and says:?I?m not happy with this change in the ingredients mix.I?ve had to explain to the board why the sales volume variance for October was $22 000 adverse. I?ve tried to explain that the quality of the soap has declined slightly and some of my customers have realized this and simply aren?t happy but no-one seems to be listening. Some customers are even demanding that the price of the soap be reduced and threatening to go elsewhere if the problem isn?t sorted out.?

(i) Briefly explain what the adverse materials mix and favourable materials yield variances indicate about production at Safe Soap Co in October.You are NOT required to discuss revision of standards or operational and planning variances.(ii) Discuss whether the sales manager could be justified in claiming that the change in the materials mix has caused an adverse sales volume variance in October.

Material Price per kilogram ($) Kilograms 0.25 Lye Coconut oil Shea butter 10 0.6 0.5 3