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Greetings sir.
I don’t understand why the loss and the actual net result after the loss were never accounted for, were never cared for , in any of the variances calculated.
This made perhaps my every answer wrong. Please explain the logic why 0.36 or 21,600 should not have been used as Actual Quantity or Standard Quantity respectively, and why should not the prices of the standard and actual not been reapportioned with the new output in mind.
Also, why should the loss and thus the net answer not been considered whilst calculating the revised budget during the calculation of the planning and operational variances ?
Thankyou
The loss has been accounted for and is the reason for the yield variance.
To produce 60,000 cakes they should have used 24,000 kg of ingredients (and lost 2,400 kg).
The actually used 23,478 kg (and lost 1,878 kg).The difference between the ingredients used (at standard mix and standard cost) is purely due to have lost less than they would have expected to lose.
What BPP has headed up as ‘alternative method’ is exactly as I do in my lectures on this.
Why is the actual output not considered as the actual input during the yield variance calculation.
Actual input should be 21,600 after deducting the loss. Because the reality is – there was some loss to the input so it doesnt remain the real input, so the net which is the actual output should be the actual input entered.If I got things wired up, please gently and clearly revise the concepts, and clear the fog in my perception.
From the cost card, for every 0.36kgs of output they should have input 0.40kgs (and lost 0.04kgs).
The actual output was 21,600 kgs and so they should have input 0.40/0.36 x 21,600 = 24,000 kgs (and lost 0.04/0.40 x 24,000 = 2,400 kg).
They actually input 23,478kgs (and actually lost 1,878 kgs)
In the Organic bread Co. thread I put up in the forum, you defined yield variance as:
“The yield variance is measuring whether more or less ended up being produced than should have been produced for the amount of materials that went in.”
So in the Crumbly Case, should not the Actual Quantity being compared to the Standard Quantity be in fact the Actual Output compared to the Standard Output instead of the Actual Input to the Standard Input for calculation purpose, as the output is the real production and not the input, and yield variance as per your explanation was “measuring whether more or less ended up being produced than should have been produced for the amount of materials that went in.”
You also added in that particular thread;
“In answer to both of your questions, the yield is always the good production that they end up with.”
So that is why Im confused why we should not be comparing the actual output with the standard output in the calculation of yield variance, both which are calculated only after deducting the losses, and thus you arrive at the standard good production (output) and the actual good production (output).
There are two different ways of calculating the yield variance (which both, obviously, give the same result). I am not prepared to waste either your time or my time by explaining both approaches – the most logical approach is the one that I explain in my lectures.
Compare what the input should have been for the actual output with what the actual input was. I have given the figures in my previous reply, and the difference between the two (when costed at standard mix and standard cost) is the yield variance i.e. the amount lost as compared with the amount that should have been lost.
Ok, so I should follow this particular rule:
“Compare what the input should have been for the actual output with what the actual input was.”
Although you also agree what I said was not wrong, and there are two approaches, the other that looks via the perspective of the logic I appealed. But we don’t have time for that.
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