ExpertMedium2 marksMultiple Choice
ACCA · Question 12 · Advanced Variances
Section A
NutriBake produces energy bars using a standard mix of oats and honey. The standard mix is 60% oats and 40% honey.
Standard prices are: Oats $2/kg, Honey $5/kg.
In the last period, NutriBake used a total of 1,000 kg of materials, consisting of 500 kg of oats and 500 kg of honey.
What is the total material mix variance?
Section A
NutriBake produces energy bars using a standard mix of oats and honey. The standard mix is 60% oats and 40% honey.
Standard prices are: Oats $2/kg, Honey $5/kg.
In the last period, NutriBake used a total of 1,000 kg of materials, consisting of 500 kg of oats and 500 kg of honey.
What is the total material mix variance?
Answer options:
A.
$300 Adverse
B.
$300 Favorable
C.
$500 Adverse
D.
$1,000 Adverse
How to approach this question
Calculate the standard mix for the actual total input (1,000 kg). Compare this to the actual mix. Multiply the differences by the standard prices.
Full Answer
A.$300 Adverse✓ Correct
Total actual input = 1,000 kg.
Standard mix (SM) for 1,000 kg: Oats = 600 kg, Honey = 400 kg.
Actual mix (AM): Oats = 500 kg, Honey = 500 kg.
Difference (SM - AM): Oats = +100 kg, Honey = -100 kg.
Variance = (Difference × Standard Price):
Oats: +100 kg × $2 = $200 Favorable
Honey: -100 kg × $5 = $500 Adverse
Total Mix Variance = $500 (A) - $200 (F) = $300 Adverse.
Common mistakes
Getting the favorable/adverse direction wrong. Using more of a cheaper material is favorable; using more of an expensive material is adverse.
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