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

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 kgLow Quality12.5 kg$4.00High Quality12.5 kg$5.00

Amount PurchasedPrice paidAmount usedLow Quality130,000 kg$3.08/kg124,138 kgHigh Quality240,000kg$4.40/kg230,542 kg

Actual production was 14,000 barrels this was 1,000 barrels less than planned.

Required

Calculate the following:

A. Direct Material Quantity (Efficiency)Variances

B. Direct Material Mix Variances

C. Direct Material Yield Variances

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

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

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