There can be a connection between the direct materials variances and the direct labor variances. In fact, there can be a relationship between many of the variances.

Let's assume that a lower costing material is purchased in order to achieve a favorable materials price variance. If the materials have some negative attributes, it is possible that an unfavorable materials usage variance could result. If the materials' attributes cause additional labor hours, then an unfavorable direct labor efficiency variance will result. If the materials required more experienced labor, it is possible that a labor rate variance will also occur.

The above example can also extend to the overhead variances. If more electricity and supplies had to be used because of the materials' attributes, there will be an unfavorable variable overhead efficiency variance. If the volume of output is curtailed by the materials' attributes, there could possibly be a fixed overhead volume variance.

Companies should have specifications for its materials in order to prevent the above situation from occurring.

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