Materials Price Variance

This video shows how to calculate the Materials Price Variance.
The Materials Price Variance is the difference between:
(1) actual quantity purchased * actual purchase price
and
(2) actual quantity purchased * standard purchase price
This is sometimes abbreviated as: (AQ * AP) - (AQ * SP)
If the company spent more than it should have (according to the standard, which is set by management), then the materials price variance is unfavorable. If the variance is large enough you should speak with the purchasing manager to identify the source of the problem (perhaps prices in the industry increased, perhaps the purchasing manager isn't getting good deals, etc.).-
Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world.
-
SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:
• A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING
• A 44-PAGE GUIDE TO U.S. TAXATION
• A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS
• MANY MORE FREE PDF GUIDES AND SPREADSHEETS
* eepurl.com/dIaa5z
-
SUPPORT EDSPIRA ON PATREON
* / prof_mclaughlin
-
GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT
* edspira.thinki...
-
LISTEN TO THE SCHEME PODCAST
* Apple Podcasts: podcasts.apple...
* Spotify: open.spotify.c...
* Website: www.edspira.co...
-
GET TAX TIPS ON TIKTOK
* / prof_mclaughlin
-
ACCESS INDEX OF VIDEOS
* www.edspira.co...
-
CONNECT WITH EDSPIRA
* Facebook: / edspira
* Instagram: / edspiradotcom
* LinkedIn: / edspira
-
CONNECT WITH MICHAEL
* Twitter: / prof_mclaughlin
* LinkedIn: / prof-michael-mclaughlin
-
ABOUT EDSPIRA AND ITS CREATOR
* www.edspira.co...
* michaelmclaugh...

[@siddiquemustafa875]

this video simply made my life easy. thanks alot.

[@angbli644]

Thanks, great explanation x

[@t-techvids9659]

Good info. What if they only used 3800 pounds, instead of 4000 pounds? Do you still do the calculation based off how much they bought?

[@AceHighAA77]

"Note that the entire price variance pertaining to all of the direct materials received was recorded immediately. In other words, the price variance associated with the direct materials received was not delayed until the materials were used." Source: courses.lumenlearning.com/sac-managacct/chapter/absorption-costing/