In variance analysis direct material total variance is the difference between the actual cost of actual number of units produced and its budgeted cost in terms of material. Direct material total variance can be divided into two components:

• the direct material price variance
  Direct material price variance
  In variance analysis direct material price variance is the difference between the standard cost and the actual cost for the actual quantity of material used or purchased...
  
  ,
• the direct material usage variance
  Direct material usage variance
  In variance analysis direct material usage variance is the difference between the standard quantity of materials that should have been used for the number of units actually produced, and the actual quantity of materials used, valued at the standard cost per unit of material...
  
  .

Example

Let us assume that standard direct material cost of widget

Widget (economics)

The word widget is a placeholder name for an object or, more specifically, a mechanical or other manufactured device. It is an abstract unit of production. The Oxford English Dictionary defines it as "An indefinite name for a gadget or mechanical contrivance, esp. a small manufactured item" and...

 is as follows:

2 kg of unobtainium

Unobtainium

In engineering, fiction, and thought experiments, unobtainium is any extremely rare, costly, or impossible material, or device needed to fulfill a given design for a given application. The properties of any particular unobtainium depend on the intended use...

 at € 60 per kg ( = € 120 per unit).

Let us assume further that during the given period, 100 widgets were manufactured, using 212 kg of unobtainium

Unobtainium

In engineering, fiction, and thought experiments, unobtainium is any extremely rare, costly, or impossible material, or device needed to fulfill a given design for a given application. The properties of any particular unobtainium depend on the intended use...

 which cost € 13,144.

Under those assumptions direct material total variance can be calculated as:

Direct material total variance can be reconciled to direct material price variance

Direct material price variance

In variance analysis direct material price variance is the difference between the standard cost and the actual cost for the actual quantity of material used or purchased...

 and direct material usage variance

Direct material usage variance

In variance analysis direct material usage variance is the difference between the standard quantity of materials that should have been used for the number of units actually produced, and the actual quantity of materials used, valued at the standard cost per unit of material...

 by:

See direct material usage variance#Example and direct material price variance#Example for computations of both components.

See also

• Variance analysis (accounting)
• Direct material price variance
  Direct material price variance
  In variance analysis direct material price variance is the difference between the standard cost and the actual cost for the actual quantity of material used or purchased...
  
  
• Direct material usage variance
  Direct material usage variance
  In variance analysis direct material usage variance is the difference between the standard quantity of materials that should have been used for the number of units actually produced, and the actual quantity of materials used, valued at the standard cost per unit of material...