ACCA PM · Chapter 12 · Question 5 of 12
A production manager changes the mix of ingredients in a process to use a higher proportion of a cheaper material. Which combination of variances is most likely to result?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) A favourable mix variance and an adverse yield variance
Explanation
Using more of the cheaper material reduces the standard cost of the actual input, giving a favourable mix variance. However, the cheaper mix may produce less output per kg of input or lower quality, leading to an adverse yield variance. The variances are interdependent and should be assessed together.
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