The role of direct materials yield and direct materials mix variances

Managers sometimes do have discretion to substitute one material for another. For example,
the manager of Aliya’s cider plant has some leeway in combining Golden Delicious, British
Coxes and Jonagold without affecting quality. We will assume that to maintain quality, the mix percentages of each type of apple can vary only up to 5% in the standard mix. For example, the percentage of British Coxes in the mix can vary between 25% and 35% (30% ±
5%). When inputs are substitutable, direct materials efficiency improvement relative to budgeted costs can come from two sources (1) using less input to achieve a given output, and) using a cheaper mix to produce a given output. The direct materials yield and mix variances divide the efficiency variance into two variances the yield variance focusing on total inputs used and the mix variance focusing on how the inputs are combined.
Given that the budgeted input mix is unchanged, the total direct materials yield
variance is the difference between two amounts (1) the budgeted cost of direct materials based on the actual total quantity of all direct materials inputs used, and (2) the flexible- budget cost of direct materials based on the budgeted total quantity of direct materials inputs for the actual output achieved. Given that the actual total quantity of all direct materials inputs used is unchanged, the total direct materials mix variance is the difference between two amounts (1) the budgeted cost for the actual direct materials input mix, and (2) the budgeted cost if the budgeted direct materials input mix had been unchanged.
Exhibit 17.2 presents the total direct materials yield and mix variances for Aliya Ltd. We start with column 3 and work our way to column 1.

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