Costing Material Usage Variances

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
I have the calc to use from college but cant seem to get the triangle effect!<BR><BR>ie work out Direct Material Variance<BR>then Material Price Variance<BR>then Material Usage Variance<BR><BR>Lecturer said that the variances adverse or favourable will make a triangle with the final answers ie is the 1st one is favourable £5000 the other 2 will total £5000 adverse? Is this the case? and what is the calc to be done for material usage variance?<BR><BR>Thanks

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Costing Material Usage Variances

    Material usage is the standard quantity-actual quantity) x standard price, meaning the difference between what you had planned to use with what you used x the original price, hope this helps.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Costing Material Usage Variances

    Total Direct Material Variance = Material price v + Material Usage v<BR><BR>eg. 500F = 800F + 300A<BR> or 600F = 400F + 200F <BR> or 800A = 450A + 350A so you can always check your calculations because they would add up<BR><BR>Is this what you mean? Hope I haven't confused you even more.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Costing Material Usage Variances

    Hi,<BR><BR>I've found the best way is to calculate the total material variance and then the usage and price because they should come back to the total material variance.<BR><BR>Eg<BR><BR>Total Material Variance:<BR>(Standard Price x standard Quantity) - (Actual Price x Actual Quantity) = X<BR><BR>Material Price Variance<BR>Actual Quantity x (Standard Price - Actual Price) = Y<BR><BR>Material Usage Variance<BR>Standard Price x (Standard Quantity - Actual Quantity) = Z<BR><BR>Y + Z = X<BR><BR>I use this a check for all the variances - labour and overheads, hope this of some help to you.<BR>TeeKay.<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Costing Material Usage Variances

    That helps thanks guys - from the notes I made I was workin gout the material usage variance incorrectly and couldnt understand why my answers werent coming back. Thanks!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Costing Material Usage Variances

    Remember that <BR>Material price variances are the difference between <b>what has been purchased</b> at the standard cost per kg/metre/litre etc and the actual amount paid<BR><BR>Whereas<BR>Material usage vaiances are comparing the standard kgs/metres etc needed to make the actual units produced with <b>the kgs/metres etc issued </b> to production all at the standard cost per kg/metre etc<BR><BR>And that if purchases are not the same as issues then stocks of raw materials have increased or decreased<BR><BR>And if my advice is any use, I'd say that you try to visualise what is happening. If you can understand the way variances drop out of the production process it is far better than rote learning variance formulae

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