Definition Direct Material Yield Variance is a measure of cost differential between output that should have been produced for the given evel of input and the level of output actually achieved during a period.
Contents: 1. Definition 2. Formula
3. Example 4. Explanation 5. Analysis
Formula Direct Material Yield Variance: = (Actual Yield - Standard Yield) x Standard Material Cost Per Unit
Example Cement PLC manufactured 10,000 bags of cement during the month of January. Consumption of raw materials during the period was as follows: Ma te ri al
Limestone Clay Sand
Qua nti ty Use d Sta nda rd Mi x Pe r Ba g Actua l Pri ce
100 tons 150 tons 250 tons
11 KG 14 KG 26 KG
$75/KG $21/KG $11/KG
Sta nda rd Pri ce
$70/KG $20/KG $10/KG
Material Yield Variance shall be c alculated as follows:
Step 1: Calculate the Standard Yield for the total materials input
500 tons of materials should have yielded 9,804 bags Standard Yield = 500 tons x 1000 / 51 KG = 9,804 bags
Step 2: Calculate the Standard Cost of materials per bag
Total material cost of 1 bag of cement: Limestone: Clay: Sand: Total
11 KG 14 KG 26 KG
x x x
$70 $20 $10
= = =
$770 $280 $260 $1,310 per bag
Actual material price should be ignored since the variance between act ual and standard price is accounted for in the material price variance.
Step 3: Calculate the Total Yield Varia nce
Material Usage Variance = [Actual Yield - Standard Yield (Step 1)] x St andard Cost / Unit (Step 2) Actual Yield - Standard Yield = 10,000 - 9,804 (Step 1) = 196 bags Total Material Yield Variance = 196 bags x $1,310 (Step 2)
= $256,760 Favorable As the ac tual output achieved during t he period is higher than the standard yield, t he 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.
Step 4: Calculate the Ma terial Wi se Yield Varia nces
Individual material yield variance can be calculated in a similar way to the total yield variance. Materials: Limestone: Clay: Sand:
Actual Yield - Standard Yield (Step 3)
x
196 bags 196 bags 196 bags
x x x
Standard Cost per bag = (Step 2) $770 $280 $260
= = =
Newsletter Yield Variance
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$150,920 $54,880 $50,960 Email * $256,760
Note that sum of individual material yield variances equals t he 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 tart of production process whereas latter focuses on the efficiency in terms of the output yield during a period.
nalysis 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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Ryan Michael Shepard • 4 years ago
Thank you very much for the speedy response :) 2
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Ryan • 4 years ago
Where does the "1000" / 51 in step 1 come from ? 1
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> Ryan • 4 years ago
Ryan, the 1000 is used here to convert tons into KGs. 51 KG is the sum of the standard mix per bag of cement (11 + 14 + 26). Hope this helps! 2
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> AccountingSimplified • 4 years ago
The question should have specified it is metric ton. Our bad. 1
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Kenneth Limosnero • 3 years ago
please put some quizzer in here. Thank you • Reply • Share › AccountingSimplified
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> Kenneth Limosnero • 3 years ago
Thanks for the suggestion Kenneth. We'll add more soon. • Reply • Share ›
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