Question

Johnson Corporation produces fertilizers by combining chemicals X and Y. The standard cost for a bag of fertilizer is:

Material X 3lb at $4 per lb.

Material Y 7lb at $5 per lb.

For 2020 Johnson Corporation manufactured 1890 bags of fertilizer. They used 7000lbs of material X and 13000lbs of material Y. Actual price of both X and Y was $4 per pound.

What is Johnson Corpoations's material mix variance?

Answer 1

Johnson Corporation's material mix variance:

Material Mix Variance = (Actual Units Used at Standard Mix - Actual Units used at actual mix) * Standard Price per lb

Total consumption of fertilizers = 7000 + 13000 = 20,000 lbs

Actual Units Used at Standard mix

Material X = 20,000 lbs * 3 lb / (3 + 7 lbs) = 6,000 lbs

Material Y = 20,000 lbs * 7lb / (3 + 7 lbs) = 14,000 lbs

Actual Units used at actual mix

Material X = 7,000 lbs

Material Y = 13,000 lbs

Standard price per lb

Material X = $4 per lb

Material Y = $5 per lb

Material Mix variance

Material	Variance
X	(6,000 - 7,000 lbs) * $4 per lb = ($4,000)
Y	(14,000 - 13,000 lbs) * $5 per lb = $5,000

Material mix variance = ($4,000) + $5,000 = $1,000 Favorable

All the best...