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a blended drink is produced using 2 ingredients, A and B.
A is more expensive than B
last week it produced fewer liters of the drink than budgeted. it also used more of ingredient A than expected.
which statement is true?
1. material mix variance is adverse and so is the Yield variance.
2. material mix variance is adverse, but yield variance can not be measured with data provided.
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the correct answer is 2, i had said 1.
that the questions said: “fewer liters than budgeted” … i took it to mean that the yield must have been less than expected.
what is wrong with my reasoning?
The yield variance is measuring whether the output is higher or lower than expected from the input.
Suppose you had budgeted on inputting 1000, wasting 10% and therefore outputing 900.
Suppose the actual output was only 450 and the input was 470.
For an output of 450 you would have expected an input of 1000/900 x 450 = 500.Since you achieved an output of 450 with an input less than would have been expected there is a favourable yield variance (even though the output is less than budgeted).
cool.. thank u…
also, thank for helping with that other problem.. discount saving … i figured it out last night … its so easy …:) … and took ur cue about looking at the ‘fall in sales’
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