Yield Variance

DEFINITION of 'Yield Variance'

The difference between actual output and standard output of a production or manufacturing process, based on standard inputs of materials and labor. The yield variance is valued at standard cost. Yield variance is generally unfavorable, i.e., actual output is less than standard or expected output, and only rarely favorable.

BREAKING DOWN 'Yield Variance'

For example, if 1,000 units of a product is the standard output based on 1,000 kilograms of materials in an 8-hour production unit, and the actual output is 990 units, there is an unfavorable yield variance of 10 units. If the standard cost is $25 per unit, the unfavorable yield variance would be $250.

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