Direct Material Variance Calculator: Price, Quantity and Total Variance
Calculate the direct material price variance, quantity (usage) variance and total variance in standard costing, marked favorable or unfavorable, with steps.
How it works
Price variance = (AP − SP) × AQ purchased · Quantity (usage) variance = (AQ used − SQ) × SP · Total variance = AQ × AP − SQ × SP = price variance + quantity variance (when AQ purchased = AQ used) · SQ = standard quantity per unit of output × actual output · Positive = unfavorable, negative = favorable
In standard costing, every product has a budgeted (standard) amount of material at a budgeted price. Comparing actual results with that standard splits the difference in material cost into two parts. The price variance shows whether you paid more or less than the standard price per unit of material, on everything you bought. The quantity, or usage, variance shows whether production used more or less material than the standard allows for the output actually produced, valued at the standard price so that price changes do not distort it. A variance is unfavorable when it raises cost above standard and favorable when it lowers it. You can enter the actual price per unit or the total invoice cost, and the standard quantity per unit of output or as a total. Under More options, turn on “Quantity used differs from quantity purchased” when part of the purchase went into inventory: the price variance then uses the quantity purchased, as most textbooks and companies do, and the quantity variance the quantity used. A threshold flags variances large enough to investigate. This page deals only with direct materials; labor and overhead variances use the same logic with hours and rates, and statistical variance pages are unrelated.
Worked example
The standard is 2.5 lb of material per unit at $4.00 per lb. The company made 1,000 units and bought and used 2,600 lb at $3.90 per lb ($10,140). The standard quantity allowed is 2.5 × 1,000 = 2,500 lb. Price variance = ($3.90 − $4.00) × 2,600 = −$260, so $260.00 Favorable. Quantity variance = (2,600 − 2,500) × $4.00 = $400.00 Unfavorable. Total variance = $10,140 − $10,000 = $140.00 Unfavorable, the same as −$260 + $400.
Sources: OpenStax Principles of Managerial Accounting, 8.2: Compute and evaluate materials variances · Saylor Managerial Accounting, 10.3: Direct materials variance analysis (purchased vs used) · AccountingCoach: Standard costing, direct materials variances · Omni Calculator: Direct material price variance
Frequently asked questions
What is the formula for direct material price variance?
Price variance = (actual price − standard price) × actual quantity purchased. If the standard is $10 per unit and you paid $12 for 1,000 units, the variance is ($12 − $10) × 1,000 = $2,000 unfavorable.
What is the direct material quantity variance?
Quantity (usage) variance = (actual quantity used − standard quantity allowed for actual output) × standard price. If production should have used 278 yards but used 290 at a $3 standard, the variance is 12 × $3 = $36 unfavorable.
How do I know if a variance is favorable or unfavorable?
For costs, a variance is unfavorable when the actual cost is higher than standard (a positive result with these formulas) and favorable when it is lower (a negative result). Paying less per pound or using fewer pounds than standard is favorable.
Should the price variance use the quantity purchased or used?
Most companies compute it on the quantity purchased, so price differences are spotted when the material is bought rather than when it is used. The quantity variance always uses the quantity used in production. When the two quantities differ, the price and quantity variances no longer add up exactly to a single total.
Who is responsible for each material variance?
The purchasing manager usually answers for the price variance, because it reflects supplier prices, order sizes and discounts. The production manager usually answers for the quantity variance, because it reflects waste, spoilage and efficiency. But a cheap, poor-quality purchase can cause an unfavorable quantity variance, so the two should be read together.
Related calculators
For study and internal analysis. Follow your company’s own costing policies when recording variances.