Direct Material Variances

Direct material  variance is the main type of variance.With material variances, we can decide to buy optimum quantity of raw material at optimum price in future because adverse direct material variances show that there is no effective  use of our resources in raw material. After knowing this fact, we improve our buying system and processing system for effective this. So, we have to study following material variances. 

1) Material Cost Variance 

Material Cost Variance = Standard Cost of Material of Actual Output - Actual cost of Actual Output


MCV = Standard Usage X Standard Price - Actual Usage X Actual Price


Material Cost Variance = Material Price Variance + Material Quantity Variance


Material Cost Variance = Material Price Variance + Material Mix Variance + Material Yield Variance

2)  Material Price Variance

 Material Price variance happens due to difference between standard price of material at actual production and actual price per unit of material at actual production. If standard price per unit is more than actual price per unit, it will be favorable material price variance.

Material Price Variance = Standard per unit price of actual output - Actual per unit price of material at actual output 

or MPV = Actual Quantity X Standard per unit price - Actual Quantity X Actual per unit price

Or MPV = Actual Quantity ( Standard per unit price - Actual per unit price )

3) Material Usages or Quantity Variance 

It is that part of material cost variance which happens due to difference between standard quantity and actual quantity of raw material at standard price. If standard usages is more than actual usages, it will be favorable material usages variance.

Material Usage Variance = Standard Price ( Standard Quantity - Actual Quantity ) 

{ Remember : In material price variance, we have to take actual usages of material as common factor and in material usages variance,we have to take standard price per unit as common factor.}

From following information, calculate MPV, MUV and MCV.

Standard Quantity Standard Price (Per Unit)  Actual Quantity Actual Price
(Per Unit)
Material 10000 10$ 15000  5$

 Material Price Variance = 15000 ( 10 -5) = $ 75000 ( Favorable)

Material Usages Variance = 10 ( 10000 - 15000 ) = $ 50000 ( Unfavorable)

Material Cost Variance = 10000 X 10 - 15000 X 5 = $ 25000 ( Favorable)

Verification = MPV + MUV = 75000 - 50000 = $ 25000 ( F)

4) Material Mix Variance 

When we use two or three type of material as mixture for production. At that time, we need to calculate material mix variance. Material Mix variance can be happened in following two situations.

First : When Actual and standard mixture of materials are same :

For example, we use two type of material for making any product. Material A's actual quantity is 160 units and Material B's actual quantity is 140 units. Standard units of material A and material N are 200 and 100. But there is no any difference between standard total and actual total. Both are 300 units. So, we use following formula

Standard Unit Cost ( Revised Standard Quantity - Actual Quantity) 

Second : When Actual and standard mixture of material are not same :

At that time, we use following formula

material mix variance formula

 5) Material Yield Variance 

Material yield variance measures abnormal loss of material. If actual abnormal loss is different from standard abnormal loss, at that time, material yield variance will happen. It is also called scrap variance. For calculating material yield variance, we first calculate standard rate.

Standard Rate = Standard Cost of revised standard mix / net standard output

MYV = Standard Rate ( Actual Yield - Revised Standard Yield)

Download our Accounting eBooks

Financial Accounting eBook

Download Now »

Cost Accounting eBook

Download Now »

Corporate Accounting eBook

Download Now »

Management Accounting eBook

Download Now »






access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar Control Your Spending corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation Diwali Messages documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Finance Journal Entries Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps Google Adsense google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting Intangible interest international Internet Introduction of Tally 9 inventory investment investment in Shares invoice IT Japan Job costing journal entries Journal Entries eBook Help Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting Online Accounting Course otcei pakistan parents Partnership pay pal pdf Personal Finance pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance truthfulness tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching Wealth wikipedia working capital youtube
Accounting Education: Direct Material Variances
Direct Material Variances
Accounting Education
Not found any lecture VIEW ALL Continue reading Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock