Materials cost variance is the difference between the standard cost of materials specified and the actual cost of materials used.<\/p>\n\n\n\n
Material Cost Variance= Standard Cost of Material for Actual Output \u2013 Actual Cost of Materials Used<\/p>\n\n\n\n
OR<\/p>\n\n\n\n
(TSC \u2013 TAC)<\/p>\n\n\n\n
OR<\/p>\n\n\n\n
(SQ \u00d7 SP) \u2013 (AQ \u00d7 AP)<\/p>\n\n\n\n
Material cost variances arise due to variation in the price of the material or in its usage. In accordance with this, material cost variances may be analyzed under two heads, viz. material price variance and material usage variance.<\/p>\n\n\n\n
Material Price Variance<\/strong><\/p>\n\n\n\n This is that portion of the material cost variance which is due to the difference between the standard price specified and the actual price paid. Material price variance is that portion of the direct materials cost variance which is the difference between the standard price specified and actual price paid for the direct materials used. This is an \u201cincurring\u201d variance. This reflects the extra price paid on the units purchased. While making this calculation standard consumption of units should not be given any consideration. It is computed by multiplying the actual quantity by the difference between the standard price and the actual price. The formula is:<\/p>\n\n\n\n Material Price Variance = Actual Quantity (Standard unit price \u2013 Actual unit price)<\/p>\n\n\n\n OR<\/p>\n\n\n\n AQ (SP \u2013 AP)<\/p>\n\n\n\n In other words, material price variance is the difference between \u2018what it actually cost and what it would have cost if the actual usage had been paid for at the standard price\u2019.<\/p>\n\n\n\n Causes of Material Price Variance<\/strong><\/p>\n\n\n\n The reasons for material price variance may be one or more of the following:<\/p>\n\n\n\n The materials price variance is generally the responsibility of the purchase manager. However, the variance may be ultimately traceable to factors beyond his control like changes in the market price.<\/p>\n","protected":false},"excerpt":{"rendered":" Materials cost variance is the difference between the standard cost of materials specified and the actual cost of materials used. Material Cost Variance= Standard Cost of Material for Actual Output \u2013 Actual Cost of Materials Used OR (TSC \u2013 TAC) OR (SQ \u00d7 SP) \u2013 (AQ \u00d7 AP) Material cost variances arise due to variation…<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-107251","page","type-page","status-publish","hentry"],"acf":[],"yoast_head":"\n