ACCA F5考試知識點講解

Materials mix variance

In any process, much time and money will have been spent ascertaining the exact optimum mix of materials. The optimum mix of materials will be the one that balances the cost of each of the materials with the yield that they generate. The yield must also reach certain quality standards. Let us take the example of a chemical, C, that uses both chemicals A and B to make it. Chemical A has a standard cost of $20 per litre and chemical B has a standard cost of $25 per litre. Research has shown that various combinations of chemicals A and B can be used to make C, which has a standard selling price of $30 per litre. The best two of these combinations have been established as:

Mix 1: 10 litres of A and 10 litres of B will yield 18 litres of C; and

Mix 2: 8 litres of A and 12 litres of B will yield 19 litres of C.

Assuming that the quality of C produced is exactly the same in both instances, the optimum mix of materials A and B can be decided by looking at the cost of materials A and B relative to the yield of C.

Mix 1: (18 x $30) – (10 x $20) – (10 x $25) = $90 contribution

Mix 2: (19 x $30) – (8 x $20) – (12 x $25) = $110 contribution

Therefore, the optimum mix that minimises the cost of the inputs compared to the value of the outputs is mix 2: 8/20 material A and 12/20 material B. The standard cost per unit of C is (8 x $20)/19 + (12 x $25)/19 = $24.21. However, if the cost of materials A and B changes or the selling price for C changes, production managers may deviate from the standard mix. This would, in these circumstances, be a deliberate act and would result in a materials mix variance arising. It may be, on the other hand, that the materials mix changes simply because managers fail to adhere to the standard mix, for whatever reason.

Material usage variance

Most students have relatively little difficulty in calculating a straightforward material usage variance. As a reminder, let’s recap on what the material usage variance is and how it is calculated. The material usage variance analyses the difference between how much actual material we used for our production relative to how much we expected to use, based on standard usage levels. So, for example, if we made 5,000 items using 11,000kg of material A and our standard material usage is only 2kg per item, then we clearly used 1,000kg of material more than we expected to (11,000kg – [2 kg x 5,000 items]). In terms of how we value this difference, it must be at standard cost. Any difference between standard and actual cost would be dealt with by the material price variance.

There can be many reasons for an adverse material usage variance. It may be that inferior quality material have been purchased, perhaps at a lower price. This may be reflected in a favourable material price variance: the materials were cheaper but as a result there was perhaps more waste.

On the other hand, it may be that changes to the production process have been made, or that increased quality controls have been introduced, resulting in more items being rejected.

Whatever the cause, it can only be investigated after separate material usage variances have been calculated for each type of material used and then allocated to a responsibility centre.