Section A

When calculating advanced variances for a bakery that mixes different types of flour, the production manager notes an adverse material mix variance and a favorable material yield variance.

What is the most likely operational explanation for this combination?

An adverse material mix variance occurs when a greater proportion of a relatively expensive material is used compared to the standard mix. A favorable material yield variance occurs when the actual output is greater than the standard expected output for the given level of inputs. Using a higher quality (more expensive) flour would cause the adverse mix, but its better quality likely reduced wastage, causing the favorable yield.