Thursday, 17 December 2015

Material Price Variance Formula

Material Price Variance Formula

Material Price variance is difference between standard price and actual price of actual quantity consumed during the production. Material price variance may be favorable or adverse.
Material Price Variance = Actual quantity x (Standard price- Actual Price).

Example

Actual Quantity Consumed = 5000 kg
Standard Price per unit = $ 5
Price of Material = 40,000
Calculate Material Price Variance

Solution

Actual Price = 40000/5 = 8 
Material Price Variance = Actual quantity x (Standard price- Actual Price).
Material Price Variance = 5000 (5 – 8)
=5000 (-3)

=-15,000 (Adverse Material Price Variance)

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