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Direct Material Variances
The total direct material cost variance for actual output can basically be divided into two types, namely (a) price variance and (b) usage variance. The method of calculating these variances is as under:
Material Variances |
Material Price variance= (Actual Price-Standard Price)*Actual Quantity
Material Usage variance= (Actual Quantity-Standard Quantity)*Standard Price
Variance may be favorable or unfavorable at any point of time depending on several controllable and uncontrollable factors.