What is defined as the difference between actual and expected material costs?

The concept of the difference between actual and expected material costs is accurately described by the term "direct materials variance." This variance specifically measures how much the actual material costs deviate from the budgeted or standard material costs for a specific period.

When analyzing this variance, it helps businesses understand their efficiency in using materials. A favorable direct materials variance occurs when actual costs are less than expected, indicating better cost management or reduced material prices. Conversely, an unfavorable variance points to higher actual costs, which might suggest inefficiencies or price increases.

The other options pertain to different categories of costs. Labor cost variance deals with the difference in actual and budgeted labor costs, administrative expense variance covers operational overhead costs unrelated to production, and fixed overhead variance assesses discrepancies in fixed manufacturing overhead expenses. Therefore, the focus on material costs distinctly aligns with the definition of direct materials variance.