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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Material yield variance definition
Hi John,
Quoting Kaplan textbook “A yield variance measures the efficiency of turning the inputs into outputs. If the yield variance is adverse, it suggests that actual output is lower than the expected output.”
Having gone through your lecture on mix and yield variance where you discuss example 3 (of chapter 14), the yield variance is $533 Adverse and the actual output (15,200) is higher than expected output (15,000). Textbook definition is not making sense to me or am I missing something here?
Many thanks,
SP
You are missing something 🙂
As Kaplan state, if the yield variance is adverse then the actual output is lower than the expected output.
The expected output is not the budgeted output. It is the output that would be expected for the amount that was inputted.
In my example that you refer to, they inputted a total of 15,200 kg. Since the standard cost card has input of 3kg for one unit, they would therefore expect to be able to produce 15,200/3 = 5,067 units. They actually produced only 5,000 units and therefore there is an adverse yield variance.
Many thanks John! Very clear now.
You. are welcome 🙂