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	9.60 lbs	0.320	$1.50	$14.40
Cheese	10.80	0.360	2.70	29.16
Sausage	9.60	0.320	2.00	19.20
Total	30.00 lbs			$62.76

Mangia put a batch of 2,000 pounds of direct materials (enough for 1,067 frozen sausage pizzas) into process. Of the total, 700 pounds were tomato sauce, 900 pounds were cheese, and the remaining 400 pounds were sausage. The actual yield was 770 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.
$ ? Unfavorable

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

	Actual mix proportion
Tomato sauce	? %
Cheese	? %
Sausage	? %

Answer 1

1. Calculation of standard mix in pounds:-

Total direct materials = 2000 pounds

Standard Ratio = .32 : .36 : .32

Revised Actual Quantity = Actual Quantity in Standard Ratio Proportion

Therefore, Standard Mix in pounds is as follows:-

Tomato Sauce : 2000 pounds * .32 = 640 pounds

Cheese : 2000 pounds * .36 = 720 pounds

Sausage : 2000 pounds * .32 = 640 pounds

2. Calculation of Mix Variance :-

Direct material Mix Variance = (Revised Actual Quantity - Actual Quantity) * Standard Price

	RAQ	AQ	SP
Tomato Sauce	2000*.32=640 pounds	700 pounds	$1.50
Cheese	2000*.36=720 pounds	900 pounds	$2.70
Sausage	2000*.32=640 pounds	400 pounds	$2.00
TOTAL	2000 pounds	2000 pounds

Tomato Sauce = (640-700)*$1.50 = $90 (Unfavourable)

Cheese = (720-900)*2.70 = $486 (Unfavourable)

Sausage = (640-400)*2 = $480 (Favourable)

Total = 90 (UNF) + 486 (UNF) + 480 (FAV) = 96 (Unfavourable)

3. Actual Proportion Used:

Tomato sauce = 700/2000*100 = 35 %

Cheese = 900/2000*100 = 45%

Sausage = 400/2000*100 = 20%