Section B - Case 2: BioGrow Agriculture
BioGrow is an agricultural company producing a premium organic fertilizer. The standard material mix for one batch of fertilizer is:
During the last month, BioGrow produced several batches. The actual total input was 10,000 kg of material, consisting of:
Calculate the total material mix variance in dollars. (Enter the numerical value only. Assume the variance is Adverse, do not enter 'A' or 'Adverse')
ACCA · Question 23 · Budgeting and control
Section B - Case 2: BioGrow Agriculture
BioGrow is an agricultural company producing a premium organic fertilizer. The standard material mix for one batch of fertilizer is:
BioGrow's production manager deliberately changed the mix this month, using more of Material Beta (the more expensive material) and less of Material Alpha. This resulted in an adverse mix variance, but a highly favorable yield variance.
How should the performance of the production manager be evaluated regarding this decision?
Answer options:
The manager should be penalized for the adverse mix variance, as standard costs must be strictly adhered to.
The manager should be praised for the favorable yield variance, ignoring the mix variance.
The manager's performance should be evaluated by looking at the net effect of the mix and yield variances combined.
The mix and yield variances should be discarded, and only the material price variance should be reviewed.
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