Scribd
Upload
25 views2 pages

Direct Material Price Variance

The document discusses direct material price variance and direct material usage variance in accounting. Direct material price variance is the difference between standard and actual cost of materials used, given the actual quantity. Direct material usage variance is the difference between standard and actual quantity of materials used, valued at the standard cost. Both variances are components of the direct material total variance.

Uploaded by

arshad m
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
25 views2 pages

Direct Material Price Variance

The document discusses direct material price variance and direct material usage variance in accounting. Direct material price variance is the difference between standard and actual cost of materials used, given the actual quantity. Direct material usage variance is the difference between standard and actual quantity of materials used, valued at the standard cost. Both variances are components of the direct material total variance.

Uploaded by

arshad m
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 2

 Direct material price variance

In variance analysis (accounting) direct material price variance is the difference between the
standard cost and the actual cost for the actual quantity of material used or purchased. It is one of
the two components (the other is direct material usage 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 price variance can be calculated as:

212 kg of unobtainium should have cost (× € 60) € 12,720

but did cost € 13,144


Direct material (unobtainium) price variance € 424 (A)

Direct material price variance can be reconciled to direct material total variance by way of direct
material usage variance:
Direct material usage variance € 720 (A)
Direct material price variance € 424 (A)
Direct material total variance € 1,144 (A)

 Direct material usage variance

In variance analysis (accounting) direct material usage 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)

You might also like