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Hi,
I’m not sure about formula for Material Yield variance. There are two methods: total method and individual. Should I get the same result using either method or it depends on what date I get?
Thanks
There are more than two methods!
You can do it any way that you want, but the total yield variance will be the same.
I assume that you have watched my lecture on mix and yield variances. I think that my way is the safest way because it gives it both individually and in total, but again – whichever way you do it will give the same answer!
Hi John,
Please can you help with regards to mix and yield variances, if the mix and yield is fav or adverse what would this show? Is this right about the mix variance?
Fav Mix Variance – Cheaper product/mix, poor quality output, More wastage/loss, less sales, more complaints and returns?
Adv Mix Variance – More expensive mix, improving the quality of the product, increased sales, waste reduction, limiting resources price of material will reduce?
What about the yield if fav or adv?
Thanks,
BronwynA favourable mix variance results from buying more of the cheaper materials and less of the more expensive. This might be due to limited resources. It could be simply to save money. It might mean lower sales because of worse quality.
An adverse mix variance results from buying more of the expensive materials and less of the cheaper. Again, this mist be due to limited resources. It might be to reduce a better product, which might lead to higher sales.
Waste is nothing directly to do with the mix variance.
It is the yield variance that looks at the waste.
A favourable yield variance means less waste; and adverse yield variance means more waste.(Although the mix variance is not directly related to the waste, there certainly can be a link – using more expensive material might mean less waste and so a favourable yield variance. Its just that the mix variance itself does not measure the amount of waste.)
Dear, John
I got some problem when calculating the yield variance
Assuming actual input is 56,000, actual output is 53,000kgs .
the loss in process is 10%Yield variance :
(In Bpp)
should be yield : 56,000*0.9= 50,400
acutal yield : 53,000
variance 2,600 (F)(in Kaplan)
intput should used: 53,000/0.9=58,888.(8)
actual inpu usedt: 56,000
variance 2,888.(8)(F)so, which way is right , I’m so confused.
Thank you alotYou have not completed the solutions – the variances are not 2600 or 2888.8. They are the differences in kg, and they need valuing in $’s.
If you do it the BPP way then you need to value at the average cost per kg of output. If you do it the Kaplan way you need to value at the average cost per kg of input.
Both ways will give the same answer in $’s.
I actually prefer to do it in a way that is a bit similar to Kaplan’s way, but which makes it much more obvious exactly what is happening.
You can see the way I do it in my free lecture on here.(For the exam is does not matter how you do it – all ways give the same answer (if done correctly).
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