Materials Mix and Yield Variance:
Learning Objective of
the article:
 Define and explain materials mix and yield variances.
 What are the formulas of materials mix and yield variances?
 Calculate
materials mix and yield variance.
Price and quantity variances of
direct materials are explained on
direct materials price variance and
direct materials quantity variance pages respectively. Here, our focus is
to explain the calculation of materials mix variance and materials
yield variance.
Formulas of Material Mix and Yield Variance:
1. Materials Mix Variance:
Actual quantities at
individual standard materials costs – Actual quantities at weighted
average of standard materials costs
2. Materials Yield Variance:
Actual quantities at
weighted average of standard materials costs – Actual output quantity
at standard materials cost
An example can help us calculation of materials
mix and yield variance. Consider the following example:
Example:
To illustrate the calculation of materials mix and yield variances assume that the
springmint Company, a manufacturer of chewing
gum, uses a standard cost system. Standard product and cost specifications
for 1,000 lbs. of chewing gum are as follows:

Quantity 
× 
Price 
= 
Cost 

Gum base 
800 

$0.25 

$200 
Corn syrup 
200 

$0.40 

80 
Sugar 
200 

$0.10 

20 

 



 
Input 
1,200 lbs 



$300 
$300 / 1,200 lbs = $0.25 per
lb.* 

===== 



==== 

Output 
1,000 



$300 
$300 / 1,000 lbs = $0.30 per
lb.* 

===== 



==== 

*Weighted average.
The production of 1,000 lbs. of chewing gum required
1,200 lbs of raw materials. Hence the yield is 1,000 lbs / 1,200lbs. or 5/6 of
input. Materials records indicate.
Materials 
Beginning Inventory 
Purchases in January 
Ending Inventory 
Materials 
Beginning Inventory 
Purchases in January 
Ending Inventory 
Gum base 
10,000 lbs 
162,000 lbs@ 0.24 
15,000 lbs 
Corn Syrup 
12,000 lbs 
30,000 lbs @ 0.42 
4,000 lbs 
Sugar 
15,000 lbs 
32,000 lbs @ 0.11 
11,000 lbs 
To convert 1,200 lbs. of raw materials into 1,000
lbs of finished product required 20 hours at $6.00 per hour or $0.12 per lbs. of
finished product. Actual direct labor hours and cost for January are 3,800 hours
at $23,104. Factory overhead is applied on a direct labor hour basis at a rate
of $5 per hour ($3 fixed , $2 variable), or $ 0.1 per lb. of finished product.
Normal overhead is $20,000 with 4,000 direct labor hours. Actual overhead for
the month is $22,000, Actual finished production for January is 200,000 lbs.
The standard cost per pound of finished chewing
gum is:
Materials 
$0.30 per lb. 
Labor 
$0.12 per lb. 
Factory overhead 
$0.10 per lb 
Required: Calculate:

Materials price variance.

Materials mix variance.

Materials yield variance.
The materials variances for January consists of
price variance, mix variance, yield variance, and quantity variance. The
company calculates the materials price variance using the
procedure explained on "direct
materials price variance" page and
recognizes variances when materials are purchased.
Materials 
Quantity 
Actual Price 
Standard Price 
Unit Price Variance 
Price variance 
Gum base 
$162,000 
$0.24 
$0.25 
$(0.01) 
$(1,620) 
Corn syrup 
30,000 
$0.42 
$0.40 
$0.02 
$600 
Sugar 
32,000 
$0.11 
$0.10 
$0.01 
$320 

 
 
 
 
 
materials price variance 




$(700)F 
The materials mix
variance results from combining materials in a ratio different from the standard
materials specifications. It is computed as follows:
Actual quantities at
individual standard materials costs: 


Gum base 157,000 @ $0.25

$39,250 

Corn syrup 38,000 @ $0.40 
$15,200 

Sugar 36,000 @ $0.10 
$3,600 


 
$58,050 
Actual quantity at weighted average of standard materials cost input 231,000
lbs × $0.25 

$57,750 


 
Materials mix variance
(unfavorable) 

$300U 


====== 
Material yield
variance is computed as follows:
Actual
quantity at weighted average of standard materials cost input 231,000 lbs ×
$0.25 
$57,750 
Actual out put quantity at standard materials cost (200,000 lbs × $0.30) 
$60,000 

 
Material yield variance (Favorable) 
$(2,250)F 
F = Favorable
U = Unfavorable
The yield variance occurred because the actual production of 200,000 lbs.
exceeded the expected output of 192,500 lbs. (5/6 of 231,000) by 7,500 lbs. The
yield difference multiplied by the standard weighted materials cost of $0.30 per
output pound equals the favorable yield variance of $2,250.
The materials quantity variance can be calculated
for each item as follows, using the procedure explained on
direct materials quantity variance page.


Unit 
× 
Standard
unit cost 
= 
Amount 
Materials
quantity variance 
Gum base: 
Actual quantity used 
157,000 lbs 

$0.25 

$39,250 


Standard
quantity allowed 
160,000 lbs* 

$0.25 

40,000 







 
$ (750)
Favorable 
Corn Syrup: 
Actual quantity
used 
38,000 lbs 

$0.40 

$15,200 


Standard
quantity allowed 
40,000 lbs** 

$0.40 

16,000 







 
$ (800)
Favorable 
Sugar: 
Actual quantity
used 
36,000 lbs 

$0.10 

$3,600 


Standard
quantity allowed 
4,000 lbs*** 

$0.10 

4,000 







 
$ (400)
Favorable 







 
Total
materials quantity variance
 
$ (1,950)
Favorable 

========== 
 *An
output of 200,000 lbs. should require and output of 240,000 lbs., with a
standard yield of 1,000 lbs. output for each 1,200 lbs input. Then the
240,000 lbs. × (800 lbs. / 1,200 lbs ) gum base portion of the formula =
160,000 lbs.
 **The
240,000 lbs. × (200lbs. / 1,200 lbs.) corn syrup portion of the formula =
40,000 lbs
 ***The
240,000 lbs. × (200lbs. / 1,200 lbs.) sugar portion of the formula =
40,000 lbs.
The total materials quantity variance can
also be determined by comparing actual quantities at standard prices,
$58,050 ($39250 + $15,200 + $3,600), to actual output quantity at standard
materials cost, $60,000 (200,000 lbs × $0.30) for a total favorable variance
of $1,950. The mix and yield variances separate the materials quantity
variance into two parts:
Materials
mix variance 
$300 unfavorable 
Materials
yield variance 
(2,250) favorable 

 
Materials
quantity variance 
$(1,950) favorable 
The influence of individual raw materials on
the total materials mix variance can be calculated in the following manner:
Materials 
Actual quantity 
Standard Formula 
× 
Total Actual Quantity 
= 
Actual quantity Using Standard Formula 
Quantity Variation 
× 
Standard Unit Price 
= 
Materials Mix Variance 
Gum base 
157,000 lbs 
800 / 1,200 

231,000 lbs. 

154,000 lbs 
3,000 lbs 

$0.25 

$750 
Corn syrup 
38,000 lbs 
200 / 1,200 

231,000 lbs. 

38,500 lbs 
(500) 

$0.40 

(200) 
Sugar 
36,000 lbs 
200 / 1,200 

231,000 lbs. 

38,500 lbs 
(2,500) 

$0.10 

(250) 

 




 
 



 

231,000 lbs 




231,000 lbs 
0 



$300 

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