Explain what is Direct Material Mix And Yield Variances

• Measures the cost of any variation from the standard mix.
• Formula:

[Actual Input Quantity-Budgeted material input quantity for the output produced] x [Standard weighted average cost per input unit-Standard cost per input unit]

[ Budgeted material input quantity for the output produced less actual material input quantity] x [Standard weighted average cost per unit of material input]

Company A produces Product XYX using 2 materials: material A and material B. After mixing both materials A & B, the product is packaged into airtight cans. The standard mix is 0.6kg of A + 0.6kg of B per 1 kg of Product XYZ.

Details:

Standard price for material A=$5 per kg; material B=$10 per kg.

The weighted average standard price per kg input is $7.50 and

The standard material cost of Product XYZ is $9 per kg produced($7.50×1.2)

Previous month 2,000 kg of material A and 3,000 kg of material B were used to produce 5,000 1 kg cans of Product XYZ, a saving 1,000 kg compared with the standard input of 3,000 kg of material A and 3,000 kg of material B.

Required:

Compute:

(a) the direct material MIX variance;

(b) the direct material YIELD variance.

Solution:

(a) Direct material MIX variance for each material using the formula: [Actual quantity of material used-standard quantity] x[Weighted average standard price per kg-Standard price per kg of the material used]

Material A=[2,000-3000]x[$7.50-$5.00]=$2,500A.

Material B=[3,000-3,000]x[$7.50-$5.00]=Nil

An adverse variance is due to the actual proportion of the cheaper input, material A being less than standard

(b) Direct material YIELD in total

[Standard quantity for output produced-actual quantity]X[Weighted average standard price per kg]

=[6,000-5000]x$7.50=$7,500F

A favorable variance has occurred because the quantity of inputs used was less than the standard required for the level of output.