Material Usage Variance Homework Help

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What is direct material usage variance?

The difference between the material’s quantity which is actual (in a particular time span) and the material’s quantity which is standard is known as direct material usage variance.

We need to check if the conditions are favorable or unfavorable to get an idea of efficiency here.

If after calculating the value of direct material usage variance, the result is negative, the condition is unfavorable, otherwise it is favorable. A favorable result tells us that the efficiency of the material used is high. Standard price is used to get the results of material usage variance.

Analysis

A favorable material usage variance indicates these following:

  • Usage of improved technological processes and machineries.
  • Workforce development along with training campaigns to maximize productivity.
  • Greater use of skilled labor
  • Higher quality material purchase than the standard one

If the materials are consumed more than the level of usage which is standard, then that can result in something which is called the’adverse variance’.

  • Lower quality products
  • Unskilled labors
  • No actions for maximizing productivity.
  • Least usage or no access to new technological processes and machineries.

What are the formulas used?

The formula used to find the material usage variance is

(AQ – SQ) x SP

Where, AQ= Actual Quantity,

SQ- Standard Quantity and

SP- Standard price.

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