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Which two of the following statements are true?
1. The sales mix variance would not give useful information to the management of Fort Co if the Cracker was a van.
2. The sales mix variance will not be affected if the labour efficiency on the Drastic production line increases, all other factors remaining the same.
3. The market share variance is a planning variance, not an operational variance.
4. If the mix variance was calculated as a physical quantity, the answer would always be zero.The answer for the above question is 1 and 4.
Dear sir,
I did not understand the 4th statement
Can you pls explain why it is true and what is the statement trying to explain
Thank youI make this very point in my free lectures on mix and yield variances!!!
Suppose the actual mix was 80kg of material A and 70kg of material B.
Suppose the standard mix had been to use an equal quantity of each material. So for a total of 150kg it should have been 75kg of A and 75kg of B.
Automatically, using more kgs of one material means using fewer kgs of the other material. One has a favourable variance of 5kg and the other has an adverse variance of 5kg, and the total of the two must always be zero.
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