Direct material usage variance

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.

• Variance analysis (accounting)