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ACCA Applied Skills · Performance Management · Material mix and yield variances

A manufacturer reports a favourable material mix variance together with an adverse material yield variance. Which explanation is most consistent with these results?

The best explanation is that more of the cheaper material was used than the standard mix allows, saving cost, but this lowered output per kg of input through extra waste or defects. Price changes would appear in the price variance, not mix or yield.

  1. AMore of the cheaper input was used than in the standard mix, but it produced less output per kg of total inputCorrect
  2. BBetter quality materials were bought that reduced waste in processing
  3. CThe purchase prices of all materials rose above standard
  4. DOutput was higher than expected from the quantity of input used

Explanation

A favourable mix variance means the actual mix was cheaper than the standard mix, so more of the cheaper material was used. An adverse yield variance means less output was obtained than expected from the inputs, which is often a consequence of using lower-quality inputs. Price rises would appear in the price variance, not in mix or yield. Better-quality materials and higher output would give a favourable yield variance.

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