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Hard2 marksMultiple Choice
Budgeting and ControlVariance AnalysisMix VarianceSyllabus Area D
This question is part of a case study — click to read the full scenario(Case 21)

Section B - Case 2: Verdant Yields

Verdant Yields produces organic liquid fertilizer by blending two materials: Nitrogen-rich (N) and Phosphorus-rich (P).

Standard data to produce 10 liters of fertilizer:
Material N: 8 liters at $5 per liter
Material P: 4 liters at $10 per liter
(Total standard input = 12 liters. Standard cost = $80).

Actual data for the month:
Output produced: 950 liters of fertilizer.
Material N purchased and used: 840 liters at $4.80 per liter.
Material P purchased and used: 360 liters at $10.50 per liter.

What is the Total Material Price Variance for the month?

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ACCA · Question 22 · Budgeting and Control

Section B - Case 2: Verdant Yields

Verdant Yields produces organic liquid fertilizer by blending two materials: Nitrogen-rich (N) and Phosphorus-rich (P).

Standard data to produce 10 liters of fertilizer:
Material N: 8 liters at $5 per liter
Material P: 4 liters at $10 per liter
(Total standard input = 12 liters. Standard cost = $80).

Actual data for the month:
Output produced: 950 liters of fertilizer.
Material N purchased and used: 840 liters at $4.80 per liter.
Material P purchased and used: 360 liters at $10.50 per liter.

What is the Total Material Mix Variance?

Answer options:

A.

$200 Adverse

B.

$200 Favorable

C.

$400 Favorable

D.

$0

How to approach this question

1. Find total actual input (840 + 360 = 1200). 2. Split 1200 into the standard mix ratio (8:4 or 2:1). 3. Compare standard mix quantity to actual mix quantity for each material. 4. Multiply by standard price.

Full Answer

B.$200 Favorable✓ Correct
Total actual input = 840 + 360 = 1,200 liters. Standard mix ratio is 8 N to 4 P (or 2/3 N, 1/3 P). Standard mix of actual total input: N = 1,200 * (8/12) = 800L. P = 1,200 * (4/12) = 400L. Mix Variance N = (Standard Mix Qty - Actual Qty) * Standard Price = (800 - 840) * $5 = $200 Adverse. Mix Variance P = (Standard Mix Qty - Actual Qty) * Standard Price = (400 - 360) * $10 = $400 Favorable. Total Mix Variance = $400 F - $200 A = $200 Favorable.

Common mistakes

Using actual prices instead of standard prices to value the variance.
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