Material Yield variance is the difference between the standard yield specified and the actual yield obtained. In other words, the difference between the actual yield of materials in manufacture and the standard yield (i.e. expected yield from a given standard input) valued at standard output price is known as materials yield variance.
It may also be defined as that portion of the direct material’s usage variance which is due to the standard yield specified and the actual yield obtained. It may arise due to the low quality of materials, defective methods of production, carelessness in handling materials, etc.
This variance is of great significance in processing industries, in which the output of one process becomes the input of the next process until the finished product is obtained at the final stage. The analysis of this variance helps effective control over-usage.
Low actual yield is unfavorable yield variance which indicates that consumption of materials was more than the standard. A high actual yield indicates efficiency, but a constant high yield is a pointer for the revision of the standard.
Material yield variance is calculated with the following formula:
=Standard Rate (Actual yield – Standard yield)