ExpertMedium2 marksMultiple Choice
ACCA · Question 13 · Budgeting and control
Section A
ChemBlend produces a cleaning solvent by mixing two chemicals, X and Y. The standard mix is 60% X and 40% Y. During the month, the actual input was 1,000 liters, consisting of 700 liters of X and 300 liters of Y. Chemical X is more expensive than Chemical Y.
What will be the direction of the material mix variance?
Section A
ChemBlend produces a cleaning solvent by mixing two chemicals, X and Y. The standard mix is 60% X and 40% Y. During the month, the actual input was 1,000 liters, consisting of 700 liters of X and 300 liters of Y. Chemical X is more expensive than Chemical Y.
What will be the direction of the material mix variance?
Answer options:
A.
Favorable
B.
Adverse
C.
Zero
D.
Cannot be determined without standard prices
How to approach this question
Compare the actual mix proportion to the standard mix proportion. If you use more of the expensive input than standard, the variance is adverse.
Full Answer
B.Adverse✓ Correct
The standard mix for 1,000 liters would be 600 liters of X and 400 liters of Y. The actual mix was 700 liters of X and 300 liters of Y. The company used 100 liters more of Chemical X (the expensive one) and 100 liters less of Chemical Y (the cheaper one). Substituting a cheaper material with a more expensive one results in an Adverse mix variance.
Common mistakes
Thinking that because total input volume is known, it's a yield variance, or guessing the direction incorrectly.
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