Quantity variances are basically of two types, Material Usage Variance and Labor Efficiency Variance. Quantity variance measures the difference between the actual usage (both of materials and labor) and the standard usage for a given level of output. We shall discuss the two quantity variances and their possible causes in greater detail.

The formula to compute material usage variance is fairly simple. The starting point is to compare the actual usage of materials for a given level of output with the standard usage set for the same level of output. This difference must be multiplied by the standard price fixed for the material. This would give us the total material usage or quantity variance. It is expressed as:

(SQ – AQ) * SP

Where:

SQ is Standard Quantity
AQ is Actual Quantity
SP is Standard Price

If the actual usage of materials is higher than the standard usage, we have an adverse (A) variance. In case of the opposite scenario, the variance is called favorable (F).

The possible causes for this variance to occur may include usage of inferior quality of materials, careless handling of materials, pilferage, changes in the methods of production, etc. It must be noted that material usage variance must be calculated separately for each type of material used in the production process.

If a company producing 100 shirts must use 275 meters of cloth (standard usage) but actually uses 285 meters of cloth, we have an adverse quantity variance of 10 meters. This quantity multiplied by the standard cost per meter of cloth (assuming it to be $30 per meter) results in a total material usage variance of $300.

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