Direct materials usage variance
Direct materials usage variance captures the cost of using more or fewer materials than the standard quantity allowed for actual output: (standard quantity for actual output − actual quantity used) × standard price.
FrameworkStandard costing and variance analysis
What it is
See it move
The standard recipe allows 8,000 kilograms of material for the output actually produced, valued at €4 a kilogram, or €32,000. Production actually consumed 8,300 kilograms, still priced at the standard €4, coming to €33,200. The usage variance, (8,000 − 8,300) × €4, is €1,200 adverse — 300 kilograms of extra consumption, with price held constant.
The formula
Variables
- standard quantity of material allowed for actual output (standard usage per unit × units produced) (units)
- actual quantity of material used in production (units)
- standard price per unit of material (€ per unit)
Valued at standard price so purchasing-price differences do not distort the efficiency signal. Positive result is favourable.
Check yourself
A manufacturer's standard material usage is 3 kg per unit at a standard price of €5.00 per kg. In June the company was budgeted to produce 400 units but actually produced 360 units. A total of 1,100 kg of material was used in production, purchased at €4.80 per kg. What is the direct materials usage variance?