Materials Price Variance Meaning

Accounting glossary · Understand, connect, apply

The materials price variance measures the cost effect of paying an actual price different from the standard price for a defined quantity of material. The quantity basis must be stated.

Example

For 600 kilograms purchased, actual price is 5.20 per kilogram and standard price is 5.00. Using the purchase basis gives 600 × 0.20 = 120 unfavourable.

Formula and assumptions

Purchase-basis price variance = quantity purchased × (actual price − standard price); positive means unfavourable in this convention

Remember the difference

Some systems calculate the variance on quantities purchased; others use quantities consumed. Do not mix the two bases when reconciling total material variances. Quality and purchasing terms can affect the interpretation.

Browse the accounting glossary → · Follow a learning path

Published 4 November 2026. Prepared with AI assistance; examples are fictional and simplified for learning.

Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.

Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.

← Return to the accounting glossary