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- Direct materials price variance is calculated as the difference between the actual cost of materials purchased and the standard cost of materials. Here are some examples of how to calculate it:
- If 5,000 pieces of Item 5-489 are purchased at a unit price of $2.47, with a standard price per unit of $2.50, the variance is calculated as (5,000 × $2.47) - (5,000 × $2.50).
- If a manufacturer sets a standard price of $4.00 per plastic sheet but purchases 2,000 sheets at an actual price of $3.80 per sheet, the variance is calculated as (2,000 × $3.80) - (2,000 × $4.00).
- If a company buys 25,000 pounds of material at $12.50 per pound instead of the standard price of $10.00 per pound, the variance is $2.50 per pound, resulting in a total variance of $62,500123.
Learn more:✕This summary was generated using AI based on multiple online sources. To view the original source information, use the "Learn more" links.The following formula is used to calculate this variance: Materials price variance = (Actual quantity purchased × Actual price) - (Actual quantity purchased × Standard price) Example: Assume that 5,000 pieces of Item 5-489 are purchased at a unit price of $2.47. The standard price per unit is $2.50.accountingexplanation.com/direct_materials_price_…During the year that follows, ABC only buys 25,000 pounds, which drives up the price to $12.50 per pound. This creates a direct material price variance of $2.50 per pound, and a variance of $62,500 for all of the 25,000 pounds that ABC purchases.www.accountingtools.com/articles/what-is-the-direc…Example of Direct Materials Price Variance Suppose, for example, a manufacturer uses plastic sheets in the manufacture of a product. They set the standard price for material at 4.00 per sheet, and later purchase 2,000 sheets from a supplier at an actual price of 3.80 per sheet.www.double-entry-bookkeeping.com/costing/direct … - People also ask
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