Direct Material Usage Variance
In
variance analysis (accounting)
direct material usage variance
is the difference betweeen 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:
Direct material usage variance
can be reconciled to
direct material total variance
by way of
direct material price variance
: See
direct material total variance#Example
and
direct material price variance#Example
for computations of both components.
See also
Variance analysis (accounting)
External links
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