Direct material mix variance is one of the germane variances to compute for a company using more than one type of direct material in its manufacturing process.

What this means is that the production of a single product requires the use of more than one direct material.

In this article, I will walk you through the meaning of material mix, we’ll also consider its calculation aspect so you can conveniently tackle scenario-based questions come what may!

## What Is Material Mix Variance?

The materials mix variance measures the difference between the actual and standard mixture of materials.

## How To Calculate Material Mix Variance

Without trying to impress you with fluff and what’s-not. Here is an explanation of what you need to do to accurately provide questions testing material mix.

- Determine the standard mix of materials.
- Compare the actual quantities of each individual material that was used and the standard quantities that would have been used.
- Find the difference between the standard mix and actual mix to get the material mix variance.
- Convert the mix variance for each individual material into a money value by multiplying by the standard price per unit of the material.

Let’s put these steps into practice by solving a question.

## Worked Example

A company makes use of three direct materials in the production of its chemical product, the following information has been provided for you to calculate the direct materials mix variance.

Material | Quantity (kg) | Standard price/kilo (₦) | Standard cost (₦) | Actual quantity used |

X | 3 | 30 | 20 | 500 |

Y | 3 | 25 | 25 | 600 |

Z | 4 | 50 | 75 | 1000 |

Total | 10 | 120 | 2100 | |

Output | 1 unit | 300 unit |

Following the above steps.

- Actual mix:

X = 500kg

Y = 600kg

Z = 1000kg

- The mix of direct materials if they were used in the standard mix (3:3:4)

X = 30% X 2100 = 630 kg

Y = 30% x 2100 = 630 kg

Z = 40% x 2100 = 840 kg

- Mix variance = (Actual mix – Standard mix) x Standard cost

X = 130 kg Favourable x 20 = 2600F

Y = 30 kg Favourable x 25 = 750F

Z = 160 kg Adverse x 75 = 12000A

- The toal mix variance = 260F + 750F + 12000A = 10990 Adverse

If you add the mix variance together it should result in Zero. 130F +30F +160A = O

## Advantages Of Material Mix Variance

- Material mix variance helps the company to assess its cost of production.
- It helps the management in budgeting.
- Helps the management to assess how it can reduce the cost of production.
- It tasks the management so it can transform unfavorable variances into favorable ones.

## What Are The Disadvantages?

- The reporting manager could easily manipulate numbers to get a desirable result.
- Material mix variance involves a complex procedure and hence, it’s prone to errors.

Now:

It should not be difficult for you to solve questions on direct material mix going forward.

Also, reading this article must have buttressed your understanding of this topic.

Leave a comment in the section below if you have other questions you’d like me to answer on this topic, and I’ll provide a response as soon as I can.

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