(Variance Analysis: Mix & Yield) A product requires a standard mix of two materials: 60% of Material A (Std price Rs. 10/kg) and 40% of Material B (Std price Rs. 15/kg). During the period, 1,000 kg of materials were input into the process in the following actual mix: 700 kg of Material A and 300 kg of Material B. What is the Material Mix Variance?

Correct answer: A) Rs. 500 Favourable

Explanation

Standard mix for actual input (1,000 kg): Mat A = 600 kg, Mat B = 400 kg. Actual mix used: Mat A = 700 kg, Mat B = 300 kg. Difference: Mat A used 100 kg MORE (Adverse). Mat B used 100 kg LESS (Favourable). Variance A = -100 kg * Rs. 10 = -Rs. 1,000. Variance B = +100 kg * Rs. 15 = +Rs. 1,500. Net Mix Variance = 1,500 (Fav) - 1,000 (Adv) = Rs. 500 Favourable. (Because they used more of the cheaper material).