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Yield Variance

What is 'Yield Variance'

Yield variance is 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.

Explaining '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.


Further Reading


On the theory of financial intermediation
www.jstor.org [PDF]
… Total variance of terminal wealth, given the equilibrium solution, is y2 = 02m'S-Im … portfolios cannot, in general, be chosen independently of the parameters of liability (asset) yields … can provide hypotheses on the response of intermedi- aries to changes in yield parameters which …

Economic determinants of the nominal treasury yield curveEconomic determinants of the nominal treasury yield curve
www.sciencedirect.com [PDF]
… Total variance of terminal wealth, given the equilibrium solution, is y2 = 02m'S-Im … portfolios cannot, in general, be chosen independently of the parameters of liability (asset) yields … can provide hypotheses on the response of intermedi- aries to changes in yield parameters which …

A causality-in-variance test and its application to financial market pricesA causality-in-variance test and its application to financial market prices
www.sciencedirect.com [PDF]
… Total variance of terminal wealth, given the equilibrium solution, is y2 = 02m'S-Im … portfolios cannot, in general, be chosen independently of the parameters of liability (asset) yields … can provide hypotheses on the response of intermedi- aries to changes in yield parameters which …

Modeling bond yields in finance and macroeconomicsModeling bond yields in finance and macroeconomics
pubs.aeaweb.org [PDF]
… Total variance of terminal wealth, given the equilibrium solution, is y2 = 02m'S-Im … portfolios cannot, in general, be chosen independently of the parameters of liability (asset) yields … can provide hypotheses on the response of intermedi- aries to changes in yield parameters which …

Measuring European financial integrationMeasuring European financial integration
academic.oup.com [PDF]
… Total variance of terminal wealth, given the equilibrium solution, is y2 = 02m'S-Im … portfolios cannot, in general, be chosen independently of the parameters of liability (asset) yields … can provide hypotheses on the response of intermedi- aries to changes in yield parameters which …

International bond risk premiaInternational bond risk premia
www.sciencedirect.com [PDF]
… Total variance of terminal wealth, given the equilibrium solution, is y2 = 02m'S-Im … portfolios cannot, in general, be chosen independently of the parameters of liability (asset) yields … can provide hypotheses on the response of intermedi- aries to changes in yield parameters which …

No-arbitrage macroeconomic determinants of the yield curveNo-arbitrage macroeconomic determinants of the yield curve
www.sciencedirect.com [PDF]
… Total variance of terminal wealth, given the equilibrium solution, is y2 = 02m'S-Im … portfolios cannot, in general, be chosen independently of the parameters of liability (asset) yields … can provide hypotheses on the response of intermedi- aries to changes in yield parameters which …

Bond ratings, bond yields and financial informationBond ratings, bond yields and financial information
onlinelibrary.wiley.com [PDF]
… Total variance of terminal wealth, given the equilibrium solution, is y2 = 02m'S-Im … portfolios cannot, in general, be chosen independently of the parameters of liability (asset) yields … can provide hypotheses on the response of intermedi- aries to changes in yield parameters which …

The macroeconomy and the yield curve: a dynamic latent factor approachThe macroeconomy and the yield curve: a dynamic latent factor approach
www.sciencedirect.com [PDF]
… Total variance of terminal wealth, given the equilibrium solution, is y2 = 02m'S-Im … portfolios cannot, in general, be chosen independently of the parameters of liability (asset) yields … can provide hypotheses on the response of intermedi- aries to changes in yield parameters which …



Q&A About Yield Variance


What does "standard" mean in this case?

Standard means expected or average performance for that time period.

Why would you want to use yield variances instead of other calculations such as duration or convexity?

You may want to use yield variances because they are easier to understand than other calculations such as duration or convexity.

How often does yield variance occur?

It occurs rarely.

What is yield variance?

Yield variance is the difference between actual output and standard output of a production or manufacturing process, based on standard inputs of materials and labor.

How are yields calculated?

Yields are calculated by dividing the annualized coupon payments by a bond's market price.

What are the two main components of yield variance?

Actual output and standard input.

In what context would you use yield variance to evaluate your business operations?

You would use it to evaluate your business operations if you were producing products that had different outputs based on different inputs (such as a factory making cars).

If you have more favorable than unfavorable variances, what does this tell you about your business's performance over time?

If you have more favorable than unfavorable variances, then it tells you that your business's performance over time has been good; however, if there are more unfavorable than favorable variances, then it tells you that your business's performance over time has been poor."

What do you need to calculate yield variances?

You need to know the current prices and annual coupons for both bonds in order to calculate yield variances.

Why do businesses need to be concerned about their yields when they produce goods or services?

Businesses need to be concerned about their yields because they want to make sure that they are getting enough product out for the amount of money spent on materials and labor costs, so they can make a profit from selling those goods/services at market value.

What does yield variance measure?

Yield variance measures the difference between two yields.

What does actual output represent in terms of a production unit?

The number of units produced in an 8-hour period with 1 kilogram as the standard input.

Is yield variance always unfavorable?

Yes, it is generally unfavorable.

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