# Quantity Variances

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.

*Material Usage Variance*
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

(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.

*Example:*
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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