Materials Yield Variance – This is the sub-variance of material usage variance. It results from the difference between actual yield and standard yield. It may be defined as that portion of the direct materials usage variance which is due to the standard yield specified and the actual yield obtained. It may arise due to low quality of materials, defective methods of production, carelessness in handling materials, etc.
Material usage (or quantity) variance arises due to the difference in standard quantity specified and actual quantity of materials used.
Material usage variance may also arise due to:
- Negligence in use of materials,
- More wastage of materials by untrained workers or defective methods of production
- Loss due to pilferage,
- Use of material mix other than the standard mix
- More or less yield from materials than the standard set, and
- Defective production necessitating the use of additional materials.
Materials usage variance= Standard Price (Standard Quantity – Actual Quantity) The quantities of material specified and actually used are taken and standard price per unit is used. If the answer from the above mentioned formula is in plus, the variance will be a favorable variance but if the answer is in minus the variance will be unfavorable or adverse.