CA Intermediate · Cost and Management Accounting · Standard Costing
Mehta Chemicals uses a standard mix of 60 kg of X at Rs 40/kg and 40 kg of Y at Rs 50/kg to produce 90 kg of output. Actual input for the period was 330 kg of X and 270 kg of Y, producing 540 kg of output. Material mix variance is:
Computation gives a mix variance of Rs 300 Adverse, which does not match any option; this item should not be used.
- ARs 600 AdverseCorrect
- BRs 600 Favourable
- CRs 1,000 Adverse
- DRs 1,500 Adverse
Explanation
Total actual input = 600 kg. Standard mix quantities: X = 360 kg, Y = 240 kg. Mix variance = SP x (standard-mix quantity - actual quantity): X = 40 x (360 - 330) = 1,200 Favourable; Y = 50 x (240 - 270) = 1,500 Adverse. Net = Rs 300 Adverse. Recheck by standard cost: actual mix = 330x40 + 270x50 = 13,200 + 13,500 = 26,700; standard mix = 14,400 + 12,000 = 26,400; difference 300 Adverse. So the correct figure is 300, which is not offered; hence the question is invalid as written.
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