Which variance specifically measures the difference between actual material usage and the standard quantity allowed for actual output, valued at the standard price?

Which variance specifically measures the difference between actual material usage and the standard quantity allowed for actual output, valued at the standard price?

• A. Material price variance
• B. Material cost variance
• C. Material usage variance
• D. Overhead variance

Answer: (C)

Material usage variance measures how much actual material used differs from the standard quantity that should have been used for the actual level of output, valued at the standard price per unit. It is calculated as (Actual quantity used − Standard quantity allowed for actual output) × Standard price. If more material is used than the standard allowance, the variance is unfavorable; if less is used, it’s favorable. This contrasts with a material price variance, which looks at the difference between the actual price paid and the standard price, multiplied by actual quantity. The material cost variance is the total of the price and usage variances, and overhead variance relates to overheads, not direct material usage. For example, if you produced the actual output that required 200 kg at a standard price of $3 per kg but used 210 kg, the usage variance is (210 − 200) × 3 = $30 unfavorable.

Material usage variance measures how much actual material used differs from the standard quantity that should have been used for the actual level of output, valued at the standard price per unit. It is calculated as (Actual quantity used − Standard quantity allowed for actual output) × Standard price. If more material is used than the standard allowance, the variance is unfavorable; if less is used, it’s favorable. This contrasts with a material price variance, which looks at the difference between the actual price paid and the standard price, multiplied by actual quantity. The material cost variance is the total of the price and usage variances, and overhead variance relates to overheads, not direct material usage. For example, if you produced the actual output that required 200 kg at a standard price of $3 per kg but used 210 kg, the usage variance is (210 − 200) × 3 = $30 unfavorable.