The correct answer is: A. Actual cost of actual mix
The material mix variance is the difference between the actual cost of the materials used in production and the standard cost of the materials that should have been used, based on the actual production mix.
The actual cost of the materials used in production is the actual price paid for the materials, multiplied by the actual quantity of materials used.
The standard cost of the materials that should have been used is the standard price per unit of material, multiplied by the standard quantity of materials that should have been used.
The standard quantity of materials that should have been used is based on the standard production mix, which is the mix of materials that is expected to be used in production.
The standard price per unit of material is the price that is expected to be paid for the materials.
The material mix variance can be caused by a number of factors, including:
- Changes in the actual production mix from the standard production mix.
- Changes in the actual price of materials from the standard price of materials.
- Errors in the measurement of the actual quantity of materials used.
The material mix variance can be a significant cost driver, and it is important to identify and control the factors that cause it.
Here is a brief explanation of each option:
- Option A: Actual cost of actual mix. This is the actual price paid for the materials, multiplied by the actual quantity of materials used. This is the correct answer because it is the difference between the actual cost of the materials used in production and the standard cost of the materials that should have been used, based on the actual production mix.
- Option B: Actual cost of standard mix. This is the actual price paid for the materials, multiplied by the standard quantity of materials that should have been used. This is not the correct answer because it does not take into account the actual production mix.
- Option C: Standard cost of actual mix. This is the standard price per unit of material, multiplied by the actual quantity of materials used. This is not the correct answer because it does not take into account the actual price of materials.
- Option D: Standard cost of budgeted mix. This is the standard price per unit of material, multiplied by the standard quantity of materials that should have been used. This is not the correct answer because it does not take into account the actual production mix.