Managerial Accounting, v1.0: "Chapter 10, Section 3: Direct Materials Variance Analysis"

Jerry’s Ice Cream is concerned about cost overruns in direct materials. This section examines "causation" in direct materials variance. The master budget amount allocated to direct materials is made up of two estimated parts, the quantity (Q) of materials included and the price (P) of those materials. Any variance in this cost category from the master budget can be accounted for by an increases or decrease in P and/or Q. Attribution of the variance to its cause(s) is critical to management decisions.