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direct materials usage variance


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In a standard costing system, a variance arising as part of the direct materials total cost variance. It compares the actual quantity of material used to carry out production with the standard quantity allowed, and values the difference at the standard material price per unit. The resultant adverse or favourable variance is the amount by which the budgeted profit is affected by virtue of material usage. The formula for this variance is:(standard quantity of material allowed for production – actual quantity used) × standard price per unit of material.

(standard quantity of material allowed for production – actual quantity used) × standard price per unit of material.

See also direct materials mix variance; direct materials yield variance.

Subjects: Accounting.


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