Material variances include two factors: Hence, the total material cost variance may result from the difference between the standard and actual quantities of materials used, the difference between the standard and actual prices paid for materials, or from a combination of the two. The following material variances are calculated: Material cost variance = (Standard quality for actual output x Standard price) - (Actual quantity x Actual price) Material cost variance can be divided into material price variance and material quantity variance. The formula for material price variance is the following: Material price variance = Actual quantity (Standard price - Actual price) In addition, the formula for material quantity variance is given as follows: Material quantity = Standard price (Standard quantity - Actual quantity) Using the materials-related information given below, calculate the material variances for XYZ company for the month of October. DMCV = DMPV + DMQV DMPV = Actual quantity (Standard price - Actual price) x = 4 (3 - 3) = 0 Y = 4 (2 - 1) = 4 (Favorable) Total = 4 (Favorable) DMQV = Standard price (Standard quantity - Actual quantity) X = 3 (5 - 4) = 3 (Favorable) Y = 2 (3 - 4) = 2 (Unfavorable) Total = 1 (Favorable) DMCV = (Standard price x Standard quantity for actual output) - (Actual price x Actual quantity) X = (3 x 5) - (3 x 4) = 15 - 12 = 3 (Favorable) Y = (2 x 3) - (1 x 4) = 6 - 4 = 2 (Favorable) OR DMCV = DMPV + DMQV DMCV = 4 + 1 = 5 (Favorable)Material Variances: Explanation
Formulas to Calculate Material Cost Variance and Material Price Variance
Example
Solution
Material Variances FAQs
Material variance is the difference between the actual cost of direct materials and the expected cost of those materials.
Material variances include two factors: 1. The amount of materials needed to produce one unit of output 2. The prices that should have been paid to acquire this quantity of materials
The following material variances are calculated: Material Cost variance = (standard quality for actual output x standard price) – (actual quantity x actual price)
The formula for material price variance is the following: material price variance = actual quantity (standard price – actual price)
The formula for material quantity variance is given as follows: material quantity = standard price (standard quantity – actual quantity)
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