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Iron Inc. manufactures fertilizers by mixing two chemicals, A and B. The standard cost information for...

Iron Inc. manufactures fertilizers by mixing two chemicals, A and B. The standard cost information for 1 bag of fertilizer is given as follows: Material A 3lb. @ $7 per pound Material B 7lb. @ $5 per pound For 2012, the firm produced 1,890 bags of fertilizer. It used 7,000 pounds of material A and 13,000 pounds of material B. The actual price of both A and B was $4.50 per pound. Required: Calculate the material mix variance of the 2012 production. Denote a favorable variance with a positive number and unfavorable variance with a negative number.

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Answer #1
Working Note 1 A B Total
Actual Input 7000 13000
Standard Price $            7.00 $            5.00
Total $ 49,000.00 $ 65,000.00 $ 114,000.00
Working Note 2 A B Total
Standard MIX for 1 bag 0.30 0.70
Actual Inputs 7000 13000 20000
Actual Inputs at Standard Mix 6000 14000
Standard Price $            7.00 $            5.00
Total $ 42,000.00 $ 70,000.00 $ 112,000.00


MIx Variance = Note 2 - Note 1 = $112000 - $114000 = $2000 Adverse

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