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Mix and Yield variances – Variance analysis – ACCA Performance Management (PM)

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  2. Hi John, if we take produced 5000 units and calculate what cost should be according to std mix and minus the actual mix costs, we will take different result. Like 5000 units at 2kg will be 10000 kg where we got 9900 and variance is 100 kg. Is this not correct?

  6. Dear John,
    While calculating the yield variance, why we had to take the ratio of material used in mix variance. Why could we not just take the actual usage of material X and Y as defined in question?.

  7. Thank you sir, great class. i have a doubt. Usage variance is the sum of Mix and Yield variane. If in the question its just asks us to find Usage variance, How can we find it directly without finding Mix and yield…?

    thanks.

    • By comparing the actual quantities with the standard quantities for the actual level of production, both costed at the standard cost.

      However it would be unusual for a question to ask for the usage variance without asking for the analysis into the mix and the yield variances.

      • Hello Sir!

        I have done that and in question the actual usage is 15,200kgs whereas the standard usage for actual production is 15,000 kgs, and the difference of them at standard cost is coming out to be $1,600(A), but in the answer sheet it鈥檚 coming out to be $300(A). Can you please tell me what鈥檚 wrong with this?

        Thanks in advance,
        Jatin

      • The actual purchases are 15,200 kg and at standard cost are $40,300.

        The original budget was for 10,000 kg of X and 5,000 kg of Y, which at standard cost is $40,000.

  8. Dear John,

    I hope you are great Sir, thank you for your time and your informative lecture I understand your lecture lesson very well but in regards to yield variance according to my understanding its the difference between the actual output and the budgeted output so the total difference is 15200-15000=200 (A) then we can allocate this variance to X and Y it will give us the yield variance in KG then we can times those by the standard cost per kg.
    It will give you the same result.
    Is that right Sir,

  11. Thank you Sir for your easy to understand lectures! I would be glad if you answer my following question. Let’s assume that our final product is Fruit Juice which is measured in litters and we use 3 type of material to produce final product. And the materials we use are measured in different unit of measure. Sugar and fruit (cherry) are in kg, but flavor enhancer is in liter. And of course adding them in different proportion rather than in standard mix will still give us final product of Juice so there is certainly mix effect there. My question is can we still use the same approach in mix calculation in this case? Thank you for your answer in advance!

  12. Thanks John for breaking down your lectures to everyone’s understanding.
    Please I’lld like to ask how we got the 2/3 and the 1/3 that was used to multiply the total material usage of 15200 in the mix variance.
    Thanks in advance for your response.

  13. Sir, you say that when analysing the toal yield variance between the different materials, they will always both be favourable or adverse. However, in the example, the yield variance is not in the same proportions as the standard mix. Therefore, theoretically, this could provide a result where although the total yield variance is either A/F, the indivudual variances could be both A and F? How can we ignore the effect of the yield variance on the mix variance?

    • No – the yield variances must all be favourable or must all be adverse. Given that we are using standard mix for both the actual total usage and the standard total usage it cannot possibly be otherwise. There is nothing theoretical about it! 馃檪

  15. Just simple enough to be easy understand, Thanks John.
    I just got confused in one point in the yield variance section; why we did use 10,133kg X & 5,067kg Y rather than 9,900kg X & 5,300kg Y at the actual total input as these are actually our inputs.
    I will leave it here and also will drop it in ask tutor forum.
    Appreciate your advice John.

  16. Thanks John. The difference between the mix and yield variances gives the material usage variance. The mix variance shows the effect of changing the proportion of the mix of material input and the yield shows the difference between the actual and expected yield or output.

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