Direct materials quantity variance

Definition

Direct materials quantity variance measures the difference between the actual quantity of direct materials used in production and the standard quantity expected to be used, multiplied by the standard cost per unit. It helps identify inefficiencies or savings in material usage.

5 Must Know Facts For Your Next Test

1. It is calculated as (Actual Quantity - Standard Quantity) x Standard Cost per Unit.
2. A favorable variance indicates less material was used than expected, while an unfavorable variance indicates more material was used.
3. This variance helps managers control costs by highlighting areas where material usage deviates from standards.
4. The standard quantity is based on predetermined benchmarks for efficiency and production needs.
5. Direct materials quantity variance can be a result of various factors including waste, theft, or changes in production processes.

Review Questions

• How do you calculate direct materials quantity variance?
• What does a favorable direct materials quantity variance indicate?
• Why is understanding direct materials quantity variance important for managers?

Related terms

Standard Cost:

A predetermined cost of manufacturing a single unit or a number of units during a specific period.

Direct Materials Price Variance:

The difference between the actual cost of direct materials and their standard cost, multiplied by the actual quantity purchased.

Variance Analysis:

The process of analyzing the differences between actual costs and standard costs to understand why variances occur.