Materials mix and yield variances

The materials usage variance can be subdivided into a materials mix variance and a materials yield variance if the proportion of materials in a mix is changeable and controllable.
The mix variance indicates the effect on costs of changing the mix of material inputs.
The yield variance indicates the effect on costs of material inputs yielding more or less than expected.
Standard input to produce 1 unit of product X:

		$
Material A	20 kgs x $10	200
Material B	30 kgs x $5	150
		350

In period 3, 13 units of product X were produced from 250 kgs of material A and 350 kgs of material B.
Solution 1: individual prices per kg as variance valuation cases

Mix Variance

                                                     Kgs

Standard mix of actual use:    A: 2/5 x (250+350)     240

                               B: 3/5 x (250+350)     360

                                                      600

                                                     ===

                                      A                      B

Mix should have been              240 kgs                 360 kgs

But was                           250 kgs                 350 kgs

Mix variance in kgs                 10 kgs (A)              10 kgs (F)

x standard cost per kg           x $10                       x $5

Mix variance in $                   $100 (A)               $50 (F)

                                      =====               ===

                                       50 (A)

Total mix variance in quantity is always zero.
Yield variance

                                              A              B

13 units of product X should have used       260 kgs             390 kgs

but actual input in standard mix was              240 kgs      360 kgs

Yield variance in kgs                         20 kgs (F)     30 kgs (F)

x standard cost per kg                          x $10             x $5

                                                $200 (F)                $150 (F)

                                               =====           =====

                                                     $350 (F)

                                                     ====

Solution 2: budgeted weighted average price per unit of input as variance valuation base.
Therefore, Budgeted weighted average price =$350/50 = $7 per kg

•       Mix variance

A              B

13 units of product X should have used          260 kgs                  390 kgs

but did use                                       250 kgs                350 kgs

Usage variance in kgs                         10 kgs (F)             40 kgs (F)

x individual price per kg – budgeted

weighted average price per kg

$ (10 – 7)                                    x $3

$ (5 – 7)                                            ____           x ($2)

                                              $30 (F)                  $80 (A)

                                              ===                      ===

                                                     $50 (A)

                                                     ===

•       Yield variance

A              B

Usage variance in kgs                              10 kg (F)              40 kg (F)

x budgeted weighted average

Price per kg                                    x $7           x $7

                                                $70 (F)               $ 280 (F)

                                                ===           ====

                                                       $350 (F)

                                                       ====