Direct Materials Price vs Quantity Variance: Which Managerial Problem Is It?
Price variance asks what the material cost per unit was; quantity variance asks how much material was used for actual output.
Price variance
The materials price variance compares actual price with standard price for the relevant quantity purchased or used under the system being tested.
Quantity variance
The materials quantity or usage variance compares actual quantity used with the standard quantity allowed for actual production, valued at standard price.
Responsibility nuance
Purchasing decisions often influence price variance, while production efficiency often influences quantity variance, but operational causes can cross departmental lines.
Exam strategy
Circle the word price or quantity before plugging numbers into a formula. Then identify the correct actual or standard quantity base.
The takeaway
Materials price variance isolates cost per input unit; materials quantity variance isolates input usage relative to the standard allowed for actual output.
Related Summit resources
FAQ
Does price variance focus on the cost per unit of material?
Yes.
Does quantity variance focus on usage?
Yes.
Can causes cross departmental responsibility lines?
Yes.