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    chin7162's Avatar
    chin7162 Posts: 1, Reputation: 1
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    #1

    Mar 19, 2010, 09:10 AM
    How do you compute total materials variance and the price and quantity variances
    The standard cost of Product B manufactured by Mateo company includes three units of direct materials at $5.50 per unit. During June, 28,000 unit of direct materials are purchased at a cost of $4.70 per unit, and 28,000 units of direct materials are used to produce 9,000 units of Product B

    Compute the total materials variance and the price and quantity variances
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
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    #2

    Mar 20, 2010, 08:32 AM

    The formula is:
    Materials price variance = Actual Quantity x (Standard Price - Actual Price)
    Note: if the firm has a standard costing system in place, this variance will be calculated on actual quantity purchased, in other cases use actual quantity used.
    Materials Usage Variance = (Standard Quantity Allowed - Actual Quantity used) x Standard Price per unit
    Total Materials variance is the total of price and usage variance.
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