Material variance is the difference between the actual costs incurred for materials and the standard costs that were expected for the same level of production.
- These variances help in understanding how well a business is managing its material costs, whether it’s due to price fluctuations, inefficiency in material usage, or other factors.
The material variances classified as:
- Material Cost Variance (MCV)
- Material Price Variance (MPV)
- Material Usage/Quantity Variance
- Material Mix Variance
- Material Yield Variance
1.) Material Cost Variance
Material Cost Variance is the difference between the standard cost of materials and the actual cost of materials .
- It is also known as Material Consumption Variance.
It depends on two factor:
- Quantity of Material used
- Price Paid for Material
2.) Material Price Variance (MPV)
Material Price Variance is the difference between the standard price and actual price paid for materials, multiplied by the actual quantity purchased.
- It reflects how well the company controlled the cost of materials purchased.
3.) Material Usage Variance (MUV)
Material Usage Variance is the difference between the standard quantity of materials and the actual quantity of material used in production, multiplied by the standard price.
- It shows how efficiently materials were used in the production process.
- It is also known as Material Joint Variance.
