Material usage or quantity variance (MUV)
Material usage variance or quantity variance indicates the difference between the standard quantities of material specified from the actual quantity of output and actual quantities of material used. The material usage variance can be calculated by multiplying the difference between the actual quantity and the standard quantity by the standard price. As such the formula for the calculation of material usage variance is as follows:
Material Usage Variance (MUV) = SP x (RSQ - AQ)
Or, MUV = MMV + MYV
Where,
SP = Standard price
RSQ = Revised standard quantity
AQ = Actual Quantity
MMV = Material mix variance
MYV = Material yield variance
If the actual quantity is less than the standard quantity, there will be a favorable variance and if the actual quantity is more than the standard quantity, there will be an unfavorable variance.
Calculation Of Material Usage Variance
Illustration
- Standard quantity of material Q for 500 units of output is fixed as 800 kg.
- Standard price per kg. of material Q is estimated to be $ 5
- Actual quantity of material Q was 800 kg.
- Actual price of material was $ 4.5 per kg.
- Actual output was 400 units.
Solution,
Since the standard outputs and actual outputs differ, the standard quantity should be revised.
Revised standard quantity (RSQ) = (SQ/SO) x AO =800/500 x 400 = 640 units.
Now, Material usage variance (MUV) = SO x (RSQ - AQ) = 5 x (640-800) = $ 800(U)
Since the actual quantity is more than standard quantity, the resulting variance is unfavorable variance.
