is direct material variance a measure of?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
what is direct material variance a measure of?
Direct material variance is the difference between standard material costs and actual material costs paid. It can be seen in the form of price or usage variation. The direct material variance is composed of two other variances, which are listed below. It is standard practice to calculate and report such two variances separately so that management can determine whether the variances are due to purchasing or manufacturing issues. Direct material variances are typically charged to the cost of sales in the period in which they occur. The relationship between domestic material consumption (DMC) and DMI indicates the extent to which material resource inputs are used for domestic consumption or exported to be consumed in other economies.
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