Material usage (or quantity) variance arises due to the difference in standard quantity specified and actual quantity of materials used.
Material usage variance may also arise due to:
- Negligence in the use of materials,
- More wastage of materials by untrained workers or defective methods of production
- Loss due to pilferage,
- Use of material mix other than the standard mix
- More or less yield from materials than the standard set, and
- Defective production necessitating the use of additional materials.
Materials usage variance = Standard Price (Standard Quantity – Actual Quantity)
The quantities of the material specified and actually used are taken and the standard price per unit is used. If the answer from the above-mentioned formula is in plus, the variance will be a favorable variance but if the answer is in minus the variance will be unfavorable or adverse.