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Contents:
1. Definition
2. Formula
3. Example
4. Explanation
5. Analysis
Formula
Direct Material Yield Variance:
Example
Cement PLC manufactured 10,000 bags of cement during the month of January. Consumption of raw materials during the
period was as follows:
Material Quantity Used Standard Mix Per Bag Actual Price Standard Price
Step 1: Calculate the Standard Yield for the total materials input
Actual material price should be ignored since the variance between actual and standard price is accounted for in the
material price variance.
Step 3: Calculate the Total Yield Variance
Material Usage Variance = [Actual Yield - Standard Yield (Step 1)] x Standard Cost / Unit (Step 2)
= $256,760 Favorable
As the actual output achieved during the period is higher than the standard yield, the variance is favorable. Favorable
material yield variance indicates the amount of savings in material costs as a result of better output yield than the
standard.
Individual material yield variance can be calculated in a similar way to the total yield variance.
Materials:
Actual Yield - Standard Yield
x
Standard Cost per bag
= Newsletter
Yield Variance
(Step 3) (Step 2)
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Limestone: 196 bags x $770 = $150,920 for articles and updates
Clay: 196 bags x $280 = $54,880
Sand: 196 bags x $260 = $50,960 Email *
$256,760
Note that sum of individual material yield variances equals the total yield variance calculated in step 3.
Explanation
Material Yield Variance measures the effect on material cost of a change in the production yield from the standard.
Material yield variance is used in conjunction with material mix variance in order to provide additional analysis of the material
usage variance.
The difference between material usage and material yield variance is that the former focuses on the utilization of input at the
start of production process whereas latter focuses on the efficiency in terms of the output yield during a period.
Analysis
A favorable material yield variance indicates better productivity than the standard yield resulting in lower material cost.
Conversely, an adverse material yield variance suggests lower production achieved during a period for the given level of input
resulting in higher material cost.
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Direct Material Mix Direct Material Usage Direct Material Price
Variance Variance Variance
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