In
variance analysis (accounting) direct material price variance is the difference between the
standard cost and the
actual cost for the
actual quantity of material purchased. It is one of the two components (the other is
direct material usage variance
In variance analysis, direct material usage (efficiency, quantity) variance is the difference between the standard quantity of materials that should have been used for the number of units actually produced, and the actual quantity of materials use ...
) of
direct material total variance.
Example
Let us assume that the standard direct material cost of
widget is as follows:
:2 kg of
unobtainium at € 60 per kg ( = € 120 per unit).
Let us assume further that during the given period, 100 widgets were manufactured, using 212 kg of
unobtainium which cost € 13,144.
Under those assumptions direct material price variance can be calculated as:
Direct material price variance can be reconciled to
direct material total variance by way of
direct material usage variance
In variance analysis, direct material usage (efficiency, quantity) variance is the difference between the standard quantity of materials that should have been used for the number of units actually produced, and the actual quantity of materials use ...
:
spending variance seen as per product cost
(212*62)-(200*60)
See
direct material total variance#Example and
direct material usage variance#Example for computations of both components.
See also
*
Variance analysis (accounting)
References
{{DEFAULTSORT:Direct Material Price Variance
Management accounting