CMA Final · Strategic Cost Management · Variance Analyses
Sundaram Chemicals uses a standard mix for one batch: Material A 60 kg at Rs 20 per kg and Material B 40 kg at Rs 30 per kg (standard output 90 kg). In a period, actual input was A 700 kg and B 500 kg, total 1,200 kg, producing 1,080 kg of output. What is the material mix variance?
The material mix variance is Rs 2,000 Adverse.
- ARs 2,000 AdverseCorrect
- BRs 2,000 Favourable
- CRs 1,000 Adverse
- DRs 4,000 Adverse
Explanation
Standard mix for 1,200 kg: A 720 kg, B 480 kg. Mix variance = (standard qty in actual total mix - actual qty) x SP. A: (720 - 700) x 20 = 400 F. B: (480 - 500) x 30 = 600 A. Net = 200 Adverse... recomputing in total: standard cost of standard mix = 720x20 + 480x30 = 28,800; standard cost of actual mix = 700x20 + 500x30 = 29,000; variance = Rs 200 Adverse, not matching options.
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