Spending variances for overhead costs; Efficiency variances for machinery and production costs rather than labor costs; and Volume variance for production. In automated systems, managers are better able to control not only the spending and efficiency variances but also the volume variance. The analysis is similar to the traditional three-variance overhead approach. See text Exhibit 7.10 (p. 269) for an illustration of variance analysis under a conversion cost approach. LO.6: (Appendix) How are variances affected by multiple material and labor categories? Mix and Yield Variances Mix and Yield Variances A mix is any possible combination of materials or labor inputs. A yield is the quantity of output that results from a specified input. Text Exhibit 7.11 (p. 271) provides standard and actual information for an example discussed in the text narrative. Material Price, Mix, and Yield Variances A material price variance shows the dollar effect of paying prices that differ from the raw material standard. The material mix variance measures the monetary effect of substituting a nonstandard mix of materials; (actual mix × actual quantity × standard price) minus (standard mix × actual quantity × standard price). The material yield variance is the difference between the actual total quantity of input and the standard total quantity allowed based on output and uses standard mix and standard prices to determine variance; (standard mix × actual quantity × standard price) minus (standard mix × standard quantity × standard price). Text Exhibit 7.12 (p. 272) presents the computations for the material variances. Labor Rate, Mix, And Yield Variances The labor mix variance presents the financial effect associated with changing the proportionate amount of higher or lower paid workers in production; (actual mix × actual hours × standard rate) minus (standard mix × actual hours × standard rate). The labor yield variance shows the monetary impact of using more or fewer total hours than the standard allowed; (standard mix × actual hours × standard rate) minus (standard mix × standard hours × standard rate).
Spending variances for overhead costs; Efficiency variances for machinery and production costs rather than labor costs; and Volume variance for production. In automated systems, managers are better able to control not only the spending and efficiency variances but also the volume variance. The analysis is similar to the traditional three-variance overhead approach. See text Exhibit 7.10 (p. 269) for an illustration of variance analysis under a conversion cost approach. LO.6: (Appendix) How are variances affected by multiple material and labor categories? Mix and Yield Variances Mix and Yield Variances A mix is any possible combination of materials or labor inputs. A yield is the quantity of output that results from a specified input. Text Exhibit 7.11 (p. 271) provides standard and actual information for an example discussed in the text narrative. Material Price, Mix, and Yield Variances A material price variance shows the dollar effect of paying prices that differ from the raw material standard. The material mix variance measures the monetary effect of substituting a nonstandard mix of materials; (actual mix × actual quantity × standard price) minus (standard mix × actual quantity × standard price). The material yield variance is the difference between the actual total quantity of input and the standard total quantity allowed based on output and uses standard mix and standard prices to determine variance; (standard mix × actual quantity × standard price) minus (standard mix × standard quantity × standard price). Text Exhibit 7.12 (p. 272) presents the computations for the material variances. Labor Rate, Mix, And Yield Variances The labor mix variance presents the financial effect associated with changing the proportionate amount of higher or lower paid workers in production; (actual mix × actual hours × standard rate) minus (standard mix × actual hours × standard rate). The labor yield variance shows the monetary impact of using more or fewer total hours than the standard allowed; (standard mix × actual hours × standard rate) minus (standard mix × standard hours × standard rate).