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Measuring yield, mix and quantity effects

6 important questions on Measuring yield, mix and quantity effects

Direct materials and Mix

When inputs are substitutable, direct materials efficiency improvement relative to budget costs can come from 2 sources:

1. using less input to achieve a given output
2. using a cheaper mix to produces a given output

Total direct materials yield variance

* Note: budgeted input mix is unchanged

It's the difference between 1. budget cost of direct materials based on actual total qty of all direct materials inputs used and 2. the flexible-budget cost of direct materials based on the budget total qty of direct materials inputs for the actual output achieved.

=
1. act. tot. qty all dir. mat. inputs used minus
2. budg. tot. qty all dir. mat. inputs allowed for act output achieved x
3. budg. dir. mat. input mix % x
4. budg. price of dir. mat. input

Revenue and Sales variance Schedule

Level 1: Static-budget variance
Level 2: Flexible-budget variance + Sales-volume variance
Level 3: Sales-mix variance + Sales-quantity variance
Level 4: Market-size variance + Market-share variance

Composite product unit

A hypothetical unit of product with weights related to the individual products of the company.

Information from Price and Efficiency variance

Individually calculated for each material, when inputs are not substitutes, provide the information necessary for decisions.

Information from Mix and Yield variance

In case of substitute inputs, various combinations of inputs can be used to produce the same output. Further splitting the efficiency variance into mix and yield variance, provides additional information.