Material B = 3.25 (1.500-1,400) = 3.25 (100) = Rs. 325 Material C = 3.50 (2,100 -2,000) = 3.50 (100) = Rs. 350 Material Usage Variance = Rs. 575 Favourable Verification: MCV = MPV + MUV - Rs.550:- Rs. 1125 + Rs. 575 - Rs. 550 = Rs. 550 (d) Material Mix Variance: Materials mix variance is that part of material usage variance which arises due to changes in standard and actual composition of mix. Materials mix variance is the difference between standard price of standard mix and standard price of actual mix. The standard price is used in calculating this variance The variance is calculated under two situations: (1) When actual weight of mix is equal to standard weight of mix, and (ii) When actual weight of mix is different from the standard mix. (i) When Actual Weight and Standard Weight of Mix is Equal In this case the formula for calculating mix variance is: Standard cost of standard mix - Standard cost of actual mix. (Standard Price x Standard Quantity) - (Standard Price x Actual Quantity) Or Standard unit cost (Standard Quantity - Actual Quantity) ( In case standard quantity is revised due to shortage of one material, the formula will be equal to Standard unit cost (Revised Standard Quantity - Actual Quantity). Example 7.3. Calculate material mix variance from the data given as such: Standard Actual Materials Quantity Price Quantity Price (Units) per unit (Units) per unit Rs. Rs. A 50 2.00 60 2.25 B 100 1.20 90 1.75 Due to the shortage of material A, the use of material A was reduced by 10% and that of material B increased by 5%