Direct material usage variance
- Direct material usage variance
-
In variance analysis (accounting) direct material usage (efficiency, quantity) variance is the difference between the standard quantity of materials that should have been used for the number of units actually produced, and the actual quantity of materials used, valued at the standard cost per unit of material. It is one of the two components (the other is direct material price variance) of direct material total variance.
Example
Let us assume that standard direct material cost of widget is as follows:
- 2 kg of unobtainium at € 60 per kg ( = € 120 per unit).
Let us assume further that during given period, 100 widgets were manufactured, using 212 kg of unobtainium which cost € 13,144.
Under those assumptions direct material usage variance can be calculated as:
| 100 units should have used (× 2 kg) |
|
200 |
kg |
| but did use |
|
212 |
kg |
| Usage variance in kg |
|
12 |
kg A |
| × standard cost per kg |
|
× € 60 |
|
| Usage variance in € |
|
€ 720 |
(A) |
Direct material usage variance can be reconciled to direct material total variance by way of direct material price variance:
| Direct material usage variance |
|
€ 720 |
(A) |
| Direct material price variance |
|
€ 424 |
(A) |
| Direct material total variance |
|
€ 1,144 |
(A) |
See direct material total variance#Example and direct material price variance#Example for computations of both components.
See also
- Variance analysis (accounting)
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direct materials total cost variance — A combination of the direct materials price variance and the direct materials usage variance; it compares the actual cost and the standard cost of the direct material consumed in carrying out the actual production. The formula for this variance… … Accounting dictionary
standard materials usage — A predetermined quantity of materials to be used in the production of a product, which is ultimately compared with the actual quantity of material used to provide a basis for material control. The difference between standard and actual usage is… … Accounting dictionary
