Yield Variance
Categories: Bonds, Muni Bonds, Metrics
No business owner likes variance in their yield. It's like pineapple on a pizza.
Yield variance is the difference between the amount of finished product expected from a given amount of inputs and the actual amount of finished product. This helps measure how effective production is in using inputs.
You can calculate yield variance by: (actual output - expected output) x standard cost per unit of inputs.
For instance, if Suzie thought 5 lemons and 5 tablespoons of sugar would yield her 10 servings of lemonade, but they only yield 8, then she’s going to have a [2 x standard cost per unit of inputs] yield variance.
Ideally, you want your yield variance to be zero, because that means you’re using up your inputs as efficiently as you thought you would. Back to the drawing board, Suzie.