{"id":521,"date":"2018-04-17T23:59:26","date_gmt":"2018-04-17T23:59:26","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/?post_type=chapter&#038;p=521"},"modified":"2024-04-29T17:22:12","modified_gmt":"2024-04-29T17:22:12","slug":"quantity-variance","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/quantity-variance\/","title":{"raw":"Quantity Variance","rendered":"Quantity Variance"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Analyze the variance between the expected amount of materials purchased and the actual amount of materials purchased<\/li>\r\n<\/ul>\r\n<\/div>\r\nYou are the purchasing manager at a large tent manufacturer. Your production manager just walked in your office fuming! \u201cWhat is this fabric you are buying? We are using twice as much per tent as we budgeted for, and labor is going to be through the roof!\u201d You had gotten a deal on the fabric, but it was the same quality you had always been buying, so you tell the production manager, \u201cthe fabric is fine. It must be a lack of training on your production floor!\u201d The CEO walks in to mediate the problem. Is it a quality problem? A training problem? An equipment problem? How do we know? This is a common issue that may come up in the manufacturing environment.\r\n\r\nTake a look at this video for further examples:\r\n\r\n<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=4309239&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=LO-2HqggRbs&amp;video_target=tpm-plugin-x79oywto-LO-2HqggRbs\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n\r\nIn our previous examples, we <strong>expected<\/strong>\u00a0to purchase 10,500 units of raw materials. When we purchase an amount different from our expected amount we call it a material yield variance. This can happen for a variety of reasons:\r\n<ol>\r\n \t<li style=\"font-weight: 400;\">We buy <strong>more<\/strong> because the quality is low and we have waste or production scrap.<\/li>\r\n \t<li style=\"font-weight: 400;\">We buy <strong>less<\/strong> because the quality is high and we have less waste and scrap.<\/li>\r\n \t<li style=\"font-weight: 400;\">We buy <strong>more<\/strong> because there are production issues.\r\n<ol>\r\n \t<li style=\"font-weight: 400;\">Poor training of production workers.<\/li>\r\n \t<li style=\"font-weight: 400;\">Problems with the production equipment causing waste.<\/li>\r\n \t<li style=\"font-weight: 400;\">New workers who are just learning their job, so a learning curve produces more waste.<\/li>\r\n<\/ol>\r\n<\/li>\r\n \t<li>We buy <strong>less<\/strong> because of production issues.\r\n<ol>\r\n \t<li style=\"font-weight: 400;\">Our production workers are experienced and know how to make the best use of the materials.<\/li>\r\n \t<li style=\"font-weight: 400;\">Our production equipment was upgraded recently giving a better yield than the old equipment.<\/li>\r\n \t<li style=\"font-weight: 400;\">We invest in training employees and get ideas from them to improve production processes.<\/li>\r\n<\/ol>\r\n<\/li>\r\n<\/ol>\r\nWhat else can you think of that may create a material yield variance? Who do we look at when we need to buy <strong>more<\/strong>?\r\n<div class=\"textbox examples\">\r\n<h3>Example<\/h3>\r\nLet\u2019s look at an example:\r\n<p style=\"padding-left: 30px;\">Mary, Production Manager: We needed more raw material because the quality of the last batch was terrible. There was waste, and we couldn\u2019t even use parts of it. It is Ben\u2014Purchasing Manager\u2014fault.<\/p>\r\n<p style=\"padding-left: 30px;\">Ben, Purchasing Manager: There is nothing wrong with the raw materials we brought in. We ordered from the same supplier, and it is the same you have been getting all along. You just aren\u2019t training your workers well, and they are creating the waste.<\/p>\r\n<p style=\"padding-left: 30px;\">Mary, Production Manager: Wait, the machines have been breaking down a lot, and we have to scrap material every time it shuts down. It is Ray\u2014the Maintenance Manager\u2019s\u2014fault.<\/p>\r\n<p style=\"padding-left: 30px;\">Ben, Purchasing Manager: Yes, let\u2019s get Ray in here. It is his fault we have needed to purchase more raw materials for production.<\/p>\r\nWell that got out of hand fast! Poor Ray hasn\u2019t even had a chance to defend himself! How might you tackle this situation?\r\n\r\n<\/div>\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/41a2f653-3ad3-4494-b6d8-9dfdf1d54d58\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Analyze the variance between the expected amount of materials purchased and the actual amount of materials purchased<\/li>\n<\/ul>\n<\/div>\n<p>You are the purchasing manager at a large tent manufacturer. Your production manager just walked in your office fuming! \u201cWhat is this fabric you are buying? We are using twice as much per tent as we budgeted for, and labor is going to be through the roof!\u201d You had gotten a deal on the fabric, but it was the same quality you had always been buying, so you tell the production manager, \u201cthe fabric is fine. It must be a lack of training on your production floor!\u201d The CEO walks in to mediate the problem. Is it a quality problem? A training problem? An equipment problem? How do we know? This is a common issue that may come up in the manufacturing environment.<\/p>\n<p>Take a look at this video for further examples:<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=4309239&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=LO-2HqggRbs&amp;video_target=tpm-plugin-x79oywto-LO-2HqggRbs\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>In our previous examples, we <strong>expected<\/strong>\u00a0to purchase 10,500 units of raw materials. When we purchase an amount different from our expected amount we call it a material yield variance. This can happen for a variety of reasons:<\/p>\n<ol>\n<li style=\"font-weight: 400;\">We buy <strong>more<\/strong> because the quality is low and we have waste or production scrap.<\/li>\n<li style=\"font-weight: 400;\">We buy <strong>less<\/strong> because the quality is high and we have less waste and scrap.<\/li>\n<li style=\"font-weight: 400;\">We buy <strong>more<\/strong> because there are production issues.\n<ol>\n<li style=\"font-weight: 400;\">Poor training of production workers.<\/li>\n<li style=\"font-weight: 400;\">Problems with the production equipment causing waste.<\/li>\n<li style=\"font-weight: 400;\">New workers who are just learning their job, so a learning curve produces more waste.<\/li>\n<\/ol>\n<\/li>\n<li>We buy <strong>less<\/strong> because of production issues.\n<ol>\n<li style=\"font-weight: 400;\">Our production workers are experienced and know how to make the best use of the materials.<\/li>\n<li style=\"font-weight: 400;\">Our production equipment was upgraded recently giving a better yield than the old equipment.<\/li>\n<li style=\"font-weight: 400;\">We invest in training employees and get ideas from them to improve production processes.<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>What else can you think of that may create a material yield variance? Who do we look at when we need to buy <strong>more<\/strong>?<\/p>\n<div class=\"textbox examples\">\n<h3>Example<\/h3>\n<p>Let\u2019s look at an example:<\/p>\n<p style=\"padding-left: 30px;\">Mary, Production Manager: We needed more raw material because the quality of the last batch was terrible. There was waste, and we couldn\u2019t even use parts of it. It is Ben\u2014Purchasing Manager\u2014fault.<\/p>\n<p style=\"padding-left: 30px;\">Ben, Purchasing Manager: There is nothing wrong with the raw materials we brought in. We ordered from the same supplier, and it is the same you have been getting all along. You just aren\u2019t training your workers well, and they are creating the waste.<\/p>\n<p style=\"padding-left: 30px;\">Mary, Production Manager: Wait, the machines have been breaking down a lot, and we have to scrap material every time it shuts down. It is Ray\u2014the Maintenance Manager\u2019s\u2014fault.<\/p>\n<p style=\"padding-left: 30px;\">Ben, Purchasing Manager: Yes, let\u2019s get Ray in here. It is his fault we have needed to purchase more raw materials for production.<\/p>\n<p>Well that got out of hand fast! Poor Ray hasn\u2019t even had a chance to defend himself! How might you tackle this situation?<\/p>\n<\/div>\n<div class=\"textbox tryit\">\n<h3>Practice Questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_41a2f653-3ad3-4494-b6d8-9dfdf1d54d58\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/41a2f653-3ad3-4494-b6d8-9dfdf1d54d58?iframe_resize_id=assessment_practice_id_41a2f653-3ad3-4494-b6d8-9dfdf1d54d58\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-521\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Quantity Variance. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>Causes of Material Variances. <strong>Authored by<\/strong>: Croesus Financial Training. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/LO-2HqggRbs\">https:\/\/youtu.be\/LO-2HqggRbs<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":62559,"menu_order":9,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Quantity Variance\",\"author\":\"Freedom Learning Group\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"copyrighted_video\",\"description\":\"Causes of Material Variances\",\"author\":\"Croesus Financial Training\",\"organization\":\"\",\"url\":\"https:\/\/youtu.be\/LO-2HqggRbs\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"}]","CANDELA_OUTCOMES_GUID":"f875b484-5286-44c1-97e1-7602ee196919, da8c023d-dede-408b-903e-7c011e2e7c0d","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-521","chapter","type-chapter","status-publish","hentry"],"part":109,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/521","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/users\/62559"}],"version-history":[{"count":12,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/521\/revisions"}],"predecessor-version":[{"id":4126,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/521\/revisions\/4126"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/parts\/109"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/521\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/media?parent=521"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapter-type?post=521"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/contributor?post=521"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/license?post=521"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}