Direct material quantity variance (also known as direct material usage or volume variance) is a part of the overall material cost variance which occurs because of the difference between actual quantity of direct material used and standard quantity allowed for the output. It indicates whether or not material has been properly utilized.
A favorable materials quantity variance indicates saving in the use of direct material. An unfavorable variance, on the other hand, indicates that material used is in excess of the standard requirement.
The Blue Sky Company provides the following data for the month of June 2016:
- Direct materials used: 4,000 units
- Standard quantity allowed: 4,200 units
- Standard price per unit of direct material: $5
Required: Calculate direct material quantity variance for Blue Sky Company. Also indicate whether it is favorable or unfavorable.
The direct material quantity variance of Blue Sky Company is favorable because actual quantity of material used is less than the standard quantity allowed.