ECONOMICS

Detailed explanation-1: -The direct material usage variance is the difference between the actual and expected unit quantity needed to manufacture a product. The variance is used in a standard costing system, usually in conjunction with the purchase price variance.

Detailed explanation-2: -The direct material price variance is one of two variances used to monitor direct materials. The other variance is the direct material yield (or usage) variance. Thus, the price variance tracks differences in raw material prices, and yield variance tracks differences in the amount of raw materials used.

Detailed explanation-3: -Hence material price variance is the difference between standard price and actual price multiplied by actual quantity.

Detailed explanation-4: -There are two components to a direct materials variance, the direct materials price variance and the direct materials quantity variance, which both compare the actual price or amount used to the standard amount.

Detailed explanation-5: -The material price variance is the difference between the actual and the standard unit price multiplied by the actual quantity of materials used. The purchase price variance is the difference between the actual and the standard unit price multiplied by the actual quantity of materials purchased.