ExpertHard2 marksMultiple Choice
ACCA · Question 12 · Budgeting and control
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?
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?
Answer options:
A.
A higher proportion of a cheaper, lower-quality flour was used, which resulted in more wastage than expected.
B.
A higher proportion of an expensive, higher-quality flour was used, which resulted in less wastage than expected.
C.
The overall price of all flours increased in the market.
D.
The standard allowance for normal loss was set too high.
How to approach this question
Analyze what causes an adverse mix (using more expensive inputs than standard) and a favorable yield (getting more output than expected from the inputs).
Full Answer
B.A higher proportion of an expensive, higher-quality flour was used, which resulted in less wastage than expected.✓ Correct
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.
Common mistakes
Reversing the definitions of mix and yield variances.
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