CA Intermediate · Cost and Management Accounting · Standard Costing
Mehta Chemicals Ltd uses a standard mix of Material A 60% at Rs 40/kg and Material B 40% at Rs 60/kg. Actual input was 1,000 kg: A 500 kg and B 500 kg. Actual yield equals standard yield for the input. What is the material mix variance?
Material mix variance is standard cost of standard mix minus standard cost of actual mix. Standard mix costs Rs 48,000 for 1,000 kg and the actual mix costs Rs 50,000, so the variance is Rs 2,000 adverse, as more costly Material B was used.
- ARs 2,000 Favourable
- BRs 2,000 AdverseCorrect
- CRs 4,000 Adverse
- DRs 1,000 Adverse
Explanation
Standard cost of actual mix = 500 x 40 + 500 x 60 = 50,000. Standard cost of standard mix = 600 x 40 + 400 x 60 = 24,000 + 24,000 = 48,000. Mix variance = 48,000 - 50,000 = Rs 2,000 Adverse, because more of the costlier B was used. Check: A is 100 kg under at 40 and B 100 kg over at 60, net 2,000 more cost.
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