CMA Study Group

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  • 1.  Mix Variances

    Posted 01-03-2019 01:14 PM
    Can anyone explain why the following Mix Variance is favorable (Gleim example SU 7):

    AQxS%xSP=$58.212
    AQxA%xSP=$58.860
    Mix Variance=$648 F?

    If the Mix was budgeted to cost $58.212 and the Mix actual cost was $58.860 how can the difference of $648 be favorably?

    Am I interpreting the results correctly?

    Thanks.



  • 2.  RE: Mix Variances

    Posted 01-05-2019 04:16 AM
    If 'SP' I assume as 'Selling Price', the actual result will be favourable -'F'. Because company could sell it above the rate it planned. 
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    Dijoy KB
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  • 3.  RE: Mix Variances

    Posted 01-06-2019 12:24 PM
    I believe "SP"="Standard Price" not "Selling Price". Under standard budgeting the selling price was set be at an expected selling price. If the actual selling price was higher, the variance you note is favorable b/c the company was able to charge more than expected.

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    Charles Hossack
    Analyst
    Coatesville PA
    United States
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  • 4.  RE: Mix Variances

    Posted 01-07-2019 08:59 AM
    ​Hi, This variance is part of a series of variances evaluating sales performance. The three main factors are (1) selling price, (2) sales mix as a percent of total units sold, and (3) units sold. The variances then compare the actual items with the standards (or budgeted) amounts for those items. So, you can see in the formula above, the sales mix variance, that the only item changing is the value of mix.

    In any case, since these measure revenue amounts, not costs amounts as most other variances measure, any 'movement' toward actual that results in higher numbers are Favorable. So, this is definitely a favorable mix variance. Most other variances (materials, labor, overhead, etc.) are cost variances. Anytime those actual amounts are higher than the standards, they are indeed unfavorable.

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    Jeanne David
    Academic
    University of Detroit Mercy
    Farmington Hills MI
    United States
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