ExpertHard2 marksShort Answer
ACCA · Question 21 · Budgeting and control
Section B - Case 2: AeroLogix
AeroLogix provides drone-based medical delivery. They manufacture their own drone batteries using a mix of Lithium (L) and Cobalt (C).
The standard mix for one batch of batteries is:
- Lithium: 6 kg at $40 per kg
- Cobalt: 4 kg at $90 per kg
In June, AeroLogix produced 100 batches. The actual materials used were:
- Lithium: 650 kg
- Cobalt: 350 kg
Calculate the total material mix variance for June. (Enter your answer as a positive number for adverse, or negative for favorable. e.g., if it is $100 Adverse, enter 100. If it is $100 Favorable, enter -100).
Section B - Case 2: AeroLogix
AeroLogix provides drone-based medical delivery. They manufacture their own drone batteries using a mix of Lithium (L) and Cobalt (C).
The standard mix for one batch of batteries is:
- Lithium: 6 kg at $40 per kg
- Cobalt: 4 kg at $90 per kg
In June, AeroLogix produced 100 batches. The actual materials used were:
- Lithium: 650 kg
- Cobalt: 350 kg
Calculate the total material mix variance for June. (Enter your answer as a positive number for adverse, or negative for favorable. e.g., if it is $100 Adverse, enter 100. If it is $100 Favorable, enter -100).
How to approach this question
1. Calculate total actual input quantity (650 + 350 = 1000 kg). 2. Calculate the standard mix of this actual total input (60% L, 40% C). 3. Compare Actual Quantity in Standard Mix (AQSM) to Actual Quantity in Actual Mix (AQAM). 4. Multiply the difference by the standard price per kg.
Full Answer
Total actual input = 650 kg (L) + 350 kg (C) = 1,000 kg.
Standard mix ratio = 6:4 (or 60% L, 40% C).
Standard mix of actual total input (AQSM):
- Lithium: 60% of 1,000 = 600 kg
- Cobalt: 40% of 1,000 = 400 kg
Mix Variance calculation (AQSM - AQAM) * SP:
Lithium: (600 - 650) * $40 = -$2,000 (Adverse, as they used more)
Cobalt: (400 - 350) * $90 = +$4,500 (Favorable, as they used less)
Total Mix Variance = -$2,000 + $4,500 = $2,500 Favorable.
Since the prompt asks for negative for favorable, the answer is -2500.
Common mistakes
Calculating the yield variance instead of the mix variance, or getting the favorable/adverse sign wrong.
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