PM - Advanced Variance

Which of the following statements is/are true regarding the material mix variance?

(1) A favourable total mix variance would suggest that a higher proportion of a cheaper

material is being used instead of a more expensive one.

(2) A favourable total mix variance will usually result in a favourable material yield

variance.

• (1) only

• Both (1) and (2)

• (2) only

• Neither (l) nor (2)

Which of the following concerning a labour planning variance is true?

• A labour planning variance will always be adverse if actual labour rates increase

• A labour planning variance will be caused by a manager changing the labour mix

  during the year

• A labour planning variance will be caused by an unexpected government policy to

  increase labour rates

• A labour planning variance will always lead to a variable overhead planning variance

Which of the following statements is/are true regarding the materials yield variance?

(1) An adverse total yield variance would suggest that less output has been achieved for

a given input, i.e. that the total input in volume is more than expected for the output

achieved.

(2) A favourable total mix variance will usually result in an adverse material yield variance.

• (1) only

• Both (1) and (2)

• (2) only

• Neither (1) nor (2)

A business advisor had planned to use 3 hours of labour on 700 client services in June.

Labour is paid $40 per hour.

In June there were actually 900 services provided. Total labour hours were 3,240 and the

actual labour rate was $42 per hour.

The advisor has since discovered that, due to a change in legislation that meant extra client

responsibilities, the budget should have provided for 3 h hours of labour per service.

What is the adverse planning labour efficiency variance for June (to the nearest $000)?

• $18,000

• $15,000

• $10,000

• $25,000

What was the materials yield variance for March?

• $6,800 favourable

• $6,800 adverse

• $1,000 favourable

• $1,000 adverse

An organisation has recorded a favourable labour rate planning variance for the year of

$40,000.

On investigation it has discovered that, whilst actual labour rates were $60 per hour, a

revised standard rate for labour should have been $70 per hour for the actual hours worked

of 20,000.

What was the original planned labour rate per hour for the year (to the nearest $)?

• $83

• $67

• $72

• $70

What is the total material mix variance?

• $1,984 adverse

• $7,216 adverse

• $9,200 adverse

• $16,416 adverse

Mr. Green makes salads. The standard plate of salad has 30 g of lettuce (L), 50 g of peppers

(P) and 80 g of beetroot (B). The standard prices of the three ingredients are $0.2/kg,

0.4/kg and 0.8/kg respectively. The actual prices were $0.22/kg, $0.38/kg and $0.82/kg.

Mr. Green has been experimenting and so in July he changed the mix of vegetables on the

plate thus: 1,500 plates contained 62,000 grams of lettuce, 81,000 grams of peppers and

102,000 grams of beetroot.

What is the value of the total favourable material mix variance (to the nearest cent)?

• $15.32

• $11.41

• $25.47

• $12.45

Mr. Green makes salads. The standard plate of salad has 30 g of lettuce (L), 50 g of peppers

(P) and 80 g of beetroot (B). The standard prices of the three ingredients are $0.2/kg,

0.4/kg and 0.8/kg respectively.

Mr. Green has been experimenting and so in July he changed the mix of vegetables on the

plate thus: 1,500 plates contained grams of lettuce, 81,000 grams of peppers and

102,000 grams of beetroot.

What is the total material yield variance?

• $2.8125 favourable

• $2.8125 adverse

• $2,812.5 favourable

• $2,812.5 adverse

What is the total material mix variance?

• $2,400 adverse

• $2,400 favourable

• $3,970 adverse

• $3,970 favourable