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CA Intermediate · Cost and Management Accounting · Standard Costing

In standard costing, which statement about the material mix variance is correct?

Material mix variance arises when the actual proportion of materials used differs from the standard proportion, measured on the same total actual input quantity and valued at standard prices. It is separate from price variance and from output volume effects.

  1. AIt arises when the actual proportion of input materials differs from the standard proportion, with total quantity held at the actual totalCorrect
  2. BIt arises only when the price of materials differs from the standard price
  3. CIt is always equal to the material price variance
  4. DIt measures the effect of producing more units than budgeted

Explanation

Mix variance compares the actual mix of materials with the standard mix applied to the same total actual quantity, valued at standard prices. Price variance is a separate matter, and volume of output does not drive the mix variance.

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