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Good Afternoon Mr Moffat
thank you very much for your help with my previous questions.
However, I came across another question on material mix variance that I can’t solve… The question is:
A company manufactures a fruit flavoured drink concentrate by mixing two liquids (X and
Y). The standard cost card for 10 litres of the drink concentrate is
Liquid X 5 litres @ $16 per litre $80
Liquid Y 6 litres @ $25 per litre $150
–––––––––––––––––––
Total 11 litres 230
The company does not hold any inventory. During the last period the company produced
4,800 litres of the drink concentrate. This was 200 litres below the budgeted output. The
company purchased 2,200 litres of X for $18 per litre, and 2,750 litres of Y for $21 per litre.
What was the materials mix variance for the period?I calculated it incorrectly as follows:
Act. Mix @ Std Price Std Mix@ Std Price
x 2200L x $16.00 = 35200 x 0.45 x 4800L x 16$ = 34560
y 2750L x $25 = 68750 y 0.55 x4800L x $25 = 66000
4800L $103,950 4800L $100,560
Mix Variance $247 (A) ?
I am not sure after all what to do with 1L per 10L of output material loss.
I look forward to your comments.
Kindest regards,
NataliyaYou need to watch my free lectures on mix and yield variances because I work through an almost identical example.
The material lost is dealt with in the yield variance.
I have watched your lecture and found your way of calculating mix and yield variances much easier to understand and remember.
It must be “red herring” in the question then! Thanks a lot I thought I was missing something 🙂
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