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Direct material total variance

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In variance analysis (accounting) direct material total variance[1] is the difference between the actual cost of actual number of units produced and its budgeted cost in terms of material. Direct material total variance can be divided into two components:

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Example

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 the given period, 100 widgets were manufactured, using 212 kg of unobtainium which cost $ 13,144.

Under those assumptions direct material total variance can be calculated as:

100 units should have cost (× $ 120 per unit)€ 12,000
but did cost€ 13,144
Direct material total variance€ 1,144(A)

Direct material total variance can be reconciled to direct material price variance and direct material usage variance by:

Direct material usage variance€ 720(A)
Direct material price variance€ 424(A)
Direct material total variance€ 1,144(A)

See direct material usage variance#Example and direct material price variance#Example for computations of both components.

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See also

References

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