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Material Usage Variance Notes

Material Usage Variance is calculated by the difference between Standard Quantity (SQ) and Actual Quantity (AQ) used, adjusted by Standard Price (SP). A favorable variance occurs when SQ exceeds AQ, while an adverse variance occurs when AQ exceeds SQ. Factors influencing these variances include machinery quality, labor skill, product design, material quality, and abnormal gains or losses.

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3 views1 page

Material Usage Variance Notes

Material Usage Variance is calculated by the difference between Standard Quantity (SQ) and Actual Quantity (AQ) used, adjusted by Standard Price (SP). A favorable variance occurs when SQ exceeds AQ, while an adverse variance occurs when AQ exceeds SQ. Factors influencing these variances include machinery quality, labor skill, product design, material quality, and abnormal gains or losses.

Uploaded by

work35254
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Material Usage Variance (Theoretical)

Material Usage Variance = SQ − AQ


= (SQ × SP) − (AQ × SP)
= SP (SQ − AQ)

Where:
SQ = Standard Quantity for Actual Output
AQ = Actual Quantity Used
SP = Standard Price per kg/unit

When the variance is:


• Favourable (F): SQ > AQ
• Adverse (A): AQ > SQ

Reasons for Favourable Variance:


(i) High-tech machinery
(ii) High-skilled labour
(iii) Product design changes (less material needed)
(iv) High-quality material
(v) Abnormal gains

Reasons for Adverse Variance:


(i) Low-tech machinery / old machines
(ii) Low-skilled labour
(iii) Product design changes (more material needed)
(iv) Low-quality material
(v) Abnormal losses

Shortcut:
SQ = Actual Output × Standard Material per Unit

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