Question

Calculating the Direct Materials Mix Variance

Mangia Pizza Company makes frozen pizzas that are sold through grocery stores. Mangia developed the following standard mix for spreading on premade pizza shells to produce 16 giant-size sausage pizzas.

Direct Material	Mix	Mix Proportion	SP	Standard Cost
Tomato sauce	16.00 lbs	0.320	$1.50	$24.00
Cheese	18.50	0.370	2.80	51.80
Sausage	15.50	0.310	2.10	32.55
Total	50.00 lbs			$108.35

Mangia put a batch of 2,000 pounds of direct materials (enough for 640 frozen sausage pizzas) into process. Of the total, 700 pounds were tomato sauce, 880 pounds were cheese, and the remaining 420 pounds were sausage. The actual yield was 750 pizzas.

Required:

1. Calculate the standard mix (SM) in pounds for tomato sauce, for cheese, and for sausage.

	SM
Tomato sauce	pounds
Cheese	pounds
Sausage	pounds

2. Calculate the mix variance.
$  

3. Calculate the actual proportion used of tomato sauce, cheese, and sausage.

	Actual mix proportion
Tomato sauce	%
Cheese	%
Sausage	%

Using the results, would the direction of the mix variance be favorable or unfavorable?

4. What if of the total 2,000 pounds of ingredients put into process, 700 pounds were tomato sauce, 700 pounds were cheese, and 600 pounds were sausage? How would that affect the mix variance?
The mix variance will be

Answer 1

Answer 1)

SM of 2000 lbs
Tomato sauce	(2000*0.32) =640 pounds
Cheese	pounds (2000*0.37) =740
Sausage	2000*0.31 =620 pounds

Answer 2

Mix variance = (standard quantity – actual quantity) SP

Tomato Sauce                   (640 – 700)*1.5 = 90 (A)

Cheese                                 (740 – 880)*2.8 = 392(A)

Sausage                               (620 – 420)*2.1 = 420 (F)

Mix Variance =                                  62(A)

Answer 3)

Actual mix proportion
Tomato sauce	700/2000*100 = 35%
Cheese	880/2000*100 =44%
Sausage	420/2000*100 = 21%

The mix variance would be unfavourable as calculated in answer 2 above

Answer 4

If the total 2,000 pounds of ingredients put into process, 700 pounds were tomato sauce, 700 pounds were cheese, and 600 pounds were sausage the mix variance would be favorable.

Mix variance = (standard quantity – actual quantity) SP

Tomato Sauce                   (640 – 700)*1.5 = 90 (A)

Cheese                                 (740 – 700)*2.8 = 112(F)

Sausage                               (620 – 600)*2.1 = 42 (F)

Mix Variance =                                  64(F)