Free Tutors for Adults and Children: Tutor.com. Live one-on-one help for elementary school, middle school, high school, and beginner college students as well as adult education students and those looking for career help (i.e. writing resumes and preparing for interviews)âavailable everyday from 2pm to 10pm.
Direct material cost is the cost of the raw materials and components used to create a product. The materials must be easily identifiable with the resulting product (otherwise they are considered to be joint costs). The direct material cost is one of the few variable costs involved in the production process; as such, it is used in the derivation of throughput from production processes. Throughput is sales minus all totally variable expenses. Examples of direct materials are: 1  The timber used to construct a house. 2  The steel included in an automobile. 3  The circuit board included in a radio. 4  The fabric used to assemble clothing.
If the quantity of direct materials actually used is less than the standard quantity for the products produced, the company will have a favorable usage variance. The amount of a favorable and unfavorable variance is recorded in a general ledger account Direct Materials Usage Variance.(Alternative account titles include Direct Materials Quantity Variance or Direct Materials Efficiency Variance.) Let's demonstrate this variance with the following information.For the purposes of calculating the direct materials usage variance, it does not concern us whether DenimWorks had a goal to produce 100 aprons, 200, aprons, or 250 aprons.). Standard costs are sometimes referred to as the should be costs..