Material Yield Variance  Losses
Illustration  Problem
Calculate material variances from the above data
Working Table
Working table populated with the information that can be obtained as it is from the problem data
Standard  Actual  

for SO  
SQ  SP  AQ  AP  
Material A Material B Material C  900 800 200  15 45 85  2,250 1,950 550  16 42 90 
Total/Mix  1,900  4,750  
Output  1,800 SO  4,320 AO 
Output (_O) is in units of measurement of output, Quantities (_Q) are in units of measurement of input, Prices (_P) are in monetary value per unit input and Costs (_C) are in monetary values.
Assuming the input and output are in kgs for the purpose of explanations.
The rest of the information that we make use of in problem solving is filled through calculations.
Formulae  Material Yield Variance (using Loss Measured based on Inputs)
Material Yield Variance is the difference between the Standard Cost of Loss for Actual Output and the Standard Cost of Actual Loss
⇒ Material Yield/SubUsage Variance (MYV/MSUV)
=  SCIL(AO) − SC(AQIL) Standard Cost of Input Loss for Actual Output − Standard Cost of Actual Quantity of Input Loss 
Standard Cost of Input Loss for Actual Output
SCIL(AO)  =  SCIL ×
 
Or  =  SQIL(AO) × SP_{Mix} Standard Quantity of Input Loss for Actual Output × Standard Price of Mix 
Standard Cost of Actual Input Loss
SC(AQIL)  =  SC ×
 
=  AQIL × SP_{Mix} Actual Quantity of Input Loss × Standard Price of Mix 
Formula in useful forms
MYV/MSUV  =  SCIL(AO) − SC(AQIL) Standard Cost of Input Loss for Actual Output − Standard Cost of Actual Quantity of Input Loss 
Or  =  [SQIL(AO) − AQIL] × SP_{Mix} Difference between Standard Quantity of Loss for Actual Output and Actual Quantity of Loss × Standard Price of Loss 
Illustration  Solution
Standard  Actual  

for SO  for AO  
SQ  SP  SQ(AO)  SC(AO)  AQ  AP  AC  
Factor  2.4  
Material A Material B Material C  900 800 200  15 45 85  2,160 1,920 480  32,400 86,400 40,800  2,250 1,950 550  16 42 90  36,000 81,900 41,800 
Total/Mix  1,900  4,560  1,59,600  4,750  1,67,400  
Input Loss  100  240  8,400  430  15,050  
Output  1,800 SO  4,320 SO(AO)  4,320 AO 
⋇ SQIL = SI − SO
⋇ AQIL = AI − AO
⋇  (AO)  = 
 
= 
 
=  2.4 
⋇  SQ(AO)  =  SQ ×
 
=  SQ × 2.4 
⋇ SC(AO) = SQ(AO) × SP
⋇  SP_{Mix}  = 

⋇ SO(AO) = AO
⋇  SQIL(AO)  =  SQIL ×
 
=  SQIL × 2.4 
⋇ SCIL(AO) = SQIL(AO) × SP
MYV/MSUV = SCIL(AO) − SC(AQIL)
Material Yield Variance due to
Material Mix,  
MYV/MSUV_{Mix}  =  SCIL(AO) − SC(AQIL)  
=  8,400 − 15,050  
=  − 6,650 [Adv] 
Alternative
MYV/MSUV = [SQIL(AO) − AQIL] × SP_{Mix}
Material Yield Variance due to
Material Mix,  
MYV/MSUV_{Mix}  =  [SQIL(AO) − AQIL] × SP_{Mix}  
=  [240 kgs − 430 kgs] × 35/kg  
=  − 190 kgs × 35/kg  
=  − 6,650 [Adv] 
Note
We can only identify the MYV/MSUV based on losses for all the materials together as the loss is measured over all materials and not for individual material.The yield variance calculated with the formula SC(AO)− SC(AI) would also give the same result.
MYV/MSUV with Losses  Miscellaneous Aspects
Loss of Mix
In dealing with losses in calculating material variances we consider loss of mix and not of individual materials. This amounts to assuming that the losses are being ascertained after the materials are mixed up for the purposes of production.For being capable of identifying the loss for individual materials, the production process should be such that the materials are processed individually till the point where the losses are ascertained. Losses should be ascertained and then the net quantities are to be combined to form the material mix.
Ascertaining Output using Loss Data
Where input and output are of the same units, the data relating to output can be ascertained using input and loss data.Standard Output ~ SO
= SI − SQIL_{Mix} Standard Input − Standard Quantity of Input Loss of Mix
Actual Output ~ AO
= AI − AQIL_{Mix} Actual Input − Actual Quantity of Input Loss of Mix
SI = SQ_{Mix} and AI = AQ_{Mix}
Nature of Variance
Based on the relations derived from the formulae for calculating MYV/MSUV, we can identify the nature of Variance
 SCIL(AO) ___ SC(AQIL)
 SQIL(AO) ___ AQIL
MYV/MSUV_{Mat}
 SCIL(AO)_{Mat} ___ SC(AQIL)_{Mat}
 SQIL(AO)_{Mat} ___ AQIL_{Mat}
MYV/MSUV_{Mix}
 SCIL(AO)_{Mix} ___ SC(AQIL)_{Mix}
 SQIL(AO)_{Mix} ___ AQIL_{Mix}
The variance would be
 zero when =
 Positive when >
 Negative when <
TMYV/MSUV
Variance of Mix and Total Variance are the same.Variance_{Mix} provides a method to find the total variance through calculations instead of by just adding up individual variances.
Interpretation of the Variance
For the material mix, for the output achieved
Variance Input Loss is indicating None as per standard efficiency Positive lesser than standard efficiency Negative greater than standard inefficiency Similar conclusions can be drawn for the individual materials based on individual quantities input. However, it should be noted that the output is a result of the mix and measuring the influence of individual materials in quantitative terms is inappropriate.
The individual variances data would be of little help in taking corrective actions.