How do I calculate material price and usage variances.
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How do I calculate material price and usage variances.
There's a couple of different ways to do this. I wish I could make my little cheat chart on here cause it's easier to follow. I'll just have to type it out.
Price variance = actual quantity (standard price - actual price)
Quantity variance = standard price (standard quantity - actual quantity)
Overall variance is the net of the above two.
Standard quantity is an odd one. It's not based on what they were planning to produce. It's the standard material per unit x the actual units made.
You can also use the above for direct labor variance, if you think of price & rate as the same thing. (i.e. cost) And think of quantity & time as the same thing.
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