The materials usage variance, which is also referred to as the materials quantity variance, is associated with a standard costing system. The materials usage variance results when a company uses more or less than the standard quantity of materials (input) that should have been used for the products actually manufactured (the good output).
The materials usage variance is unfavorable when the actual quantity of materials used exceeded the standard quantity of materials. The materials usage variance is favorable when the actual quantity of materials used was less than the standard quantity. In the U.S. the materials usage variance is expressed in dollars, which is calculated by multiplying the favorable or unfavorable quantity (such as pounds) times the standard cost per pound.
To illustrate, let's assume that a company has a standard of 5 pounds of materials to produce one unit of output. The company also established that the standard cost per pound of the materials is $3 per pound. If the company produced 100 units of output, the company should have used 500 pounds of input (100 units of good output X 5 pounds of input per unit of output). If the company actually used 530 pounds of input, the materials usage variance will be $90 unfavorable (30 pounds of additional input X the standard cost per pound of $3). The $90 unfavorable materials usage variance can be explained by the following: $1,590 (530 actual pounds used X $3 standard cost) vs. the standard of $1,500 (100 units of output X 5 standard pounds = 500 standard pounds x $3 standard cost).
