Page 233 - Microsoft Word - 00 Prelims.docx

Advanced variances

6.2 Mix variance

A mix variance is used to monitor the cost of material.

For instance, if more of an expensive material has been used and less of a cheap
material, the cost will be higher – and the variance adverse.

Material Actual Quantity, Actual Difference @ Standard Variance
Actual Mix (AQAM) Quantity, price
Standard Mix
(AQSM) *

M1 X kgs A kgs A – X $x $Var
(F/A)

M2 Y kgs B kgs B – Y $x $Var
(F/A)

M3 Z kgs C kgs C – Z $x $Var
(F/A)

Sum (X+Y+Z) Sum (X+Y+Z) Total = 0 $Total
mix
(F/A)
* this is the key calculation for mix variances. You need to split the total actual
quantity in the standard ratio of the materials.

Illustrations and further practice

Now try TYU 8 ‘Materials Mix’.

227