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.
Read more about this topic: Direct Material Usage Variance
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