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I have a seemingly major doubt in this topic area(Material mix variance). My understanding is that material mix variance is calculated between interchangeable materials which can be used in different proportions. But then the question that arises is that if the materials are interchangeable then why do the prices of the two so called “interchangeable” materials are different, as in why talk about striking a right balance between the quantities of two materials(preferring cheaper material over more expensive one) when they are essentially similar?
and if the differentiating factor is the varying quality, then they are not “interchangeable” apparently.
seems to me like a paradox. Could you shed some light on this sir?
The correct word is substitutable.
The example I use to explain this in my free lectures should make it clear.