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Direct Material Variance:

Direct Material Variance

Direct Material Variance:

                When we are involve in the production costing at that time we need to understand the direct material costing concept completely. The Direct Material can be define as those materials which are directly involved in the production of materials and goods and they are completely consumed in the productions process those materials are known as direct materials.

The difference between the standard materials cost and actual material cost is known as the material variance. That is also known as total direct material variance. The managerial accountants have proper abstracted formulas to define the total direct material variances. Which is a explained as bellow:

Direct Material Variance:             Static Budget                    -              Actual Results
                                                =             (SQ x SP)              -              (AQ x AP)

                                Static Budget:                    Standard Quantity x Standard Price

                                Actual Results:                  Actual Quantity x Actual Price

The Direct Material variance has future effects on the product price and quantity and we have two different variance there and that are known as price variance and quantity variance and they can be explain as follows:

Direct Material Price Variance:

                That means the difference between the direct material standard and actual price and we can further explain it as follows.

Direct Material Price Variance:                   Middle Budget  -              Actual Results

                                                                =             (AQ x SP)             -              (AQ x AP)

                                                                =             AQ          x              (SP x AP)

                                   
Direct Material Quantity Variance:

                That means the difference between the direct material standard and actual quantity and we can further explain it as follows.

Direct Material Quantity Variance:                           Static Budget     -              Middle Budget  

                                                               =             (SQ x SP)              -              (AQ x SP)   
         
                                                                =             SP           x              (SQ x AQ)

There is still the favorable and unfavorable concept exits in the  direct material variances and according to it when the workers of a production company they use the less quantity of materials and put their complete efforts to make the efficient production for company that variance is known as favorable variance and when the worker shrink the production, making the huge material waste and involving in the material or products theft activities that is called the unfavorablevariance for the direct marital .

                                                               


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