Page 114 - BA2 Integrated Workbook - Student 2017
P. 114
Chapter 7
2.2 Material variances
Direct material
price variance
Direct material total
variance
Direct material
usage variance
Direct material price variance
The direct material price variance reveals how much of the direct material total
variance was caused by paying a different price for the materials purchased.
$
22,500 kg purchased should have cost (× $7) 157,500
But did cost 146,250
———–
Direct material price variance $11,250 favourable
———–
Direct material usage variance
The direct material usage variance reveals how much of the direct material total
variance was caused by using a different quantity of material, compared with the
standard allowance for the production achieved.
kg
2,100 units produced should have used (× 10 kg) 21,000
But did use 22,500
——–—
Variance in kg 1,500 adverse
—–——
× standard price per kg ($7):
Direct material usage variance $10,500 adverse
——–—
Direct material total variance = $11,250 favourable + $10,500 adverse = $750
favourable
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