Enter the standard price and the actual material cost into the Calculator. The calculator will evaluate the Material Price Variance.
Material Price Variance Formula
MPV = SP - AMC
Variables:
- MPV is the Material Price Variance ($)
- SP ($) is the standard price
- AMC ($) is the actual material cost
To calculate Material Price Variance, subtract the actual material cost but the standard price.
How to Calculate Material Price Variance?
The following steps outline how to calculate the Material Price Variance.
- First, determine the standard price.
- Next, determine the actual material cost.
- Next, gather the formula from above = MPV = SP – AMC.
- Finally, calculate the Material Price Variance.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
standard price = 334
actual material cost = 156
FAQ
What is Material Price Variance?
Material Price Variance (MPV) is the difference between the actual cost of materials and the standard cost that was expected or budgeted for those materials. It helps businesses understand how their actual costs compare to their planned costs.
Why is calculating Material Price Variance important?
Calculating MPV is crucial for businesses as it helps identify inefficiencies in purchasing materials, negotiating prices, or managing inventory. It can highlight areas where costs can be reduced or where budgeting needs to be adjusted.
How can a negative Material Price Variance affect a business?
A negative MPV indicates that the actual material costs were higher than the standard or expected costs. This can reduce the overall profit margins and indicate potential issues in the procurement process or supplier management that need to be addressed.
Can Material Price Variance be used for all types of materials?
Yes, MPV can be applied to any type of material used in the production of goods or services. However, it is most useful for materials that have significant cost implications for the business or where prices are volatile.
