Q12RQ - Horngren'S Financial And Managerial Accounting

Question

Question: List the direct materials variances, and briefly describe each. 

Step-by-Step Solution

Answer

Answer

The direct material variances can be in the form of direct material cost variance and direct material efficiency variance

Step 1 Definition of direct materials

Direct materials are defined as the raw materials which are used in the manufacturing process of the company.

Step 2 Static budget affects the cost and efficiency variances

The direct material variances are as follows:

1. Direct Material Cost variance: This variance shows how well the business is able to keep the cost of actual direct material within the standards. 

 

1. Direct Material Efficiency Variance: The efficiency variance shows the ability of the company to keep the actual usage of direct materials within the standards