Material variances can be of the following categories:
● Material Cost Variance
● Material Price Variance
● Material Usage Variance
● Material Mix Variance
● Material Yield Variance
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Material Cost Variance |
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Standard cost of materials for actual output – Actual cost of material used Or Material price variance + Material usage or quantity variance Or Material price variance + Material mix variance + Material yield variance |
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Material Price Variance |
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Actual usage ( Standard Quantity Price – Actual Unit Price) Actual Usage = Actual Quantity of material (in units) used Standard Unit Price = Standard Price of material per unit Actual Unit Price = Actual price of material per unit |
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Material Usage or Quantity Variance |
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Material usage or Quantity variance : Standard price per unit (Standard Quantity – Actual Quantity ) |
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Material Mix Variance |
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Material mix variance arises due to the difference between the standard mixture of material and the actual mixture of Material mix. Material Mix variance is calculated as a difference between the standard prices of standard mix and the standard price of actual mix. If there is no difference between the standard and the actual weight of mix, then: Standard unit cost (Standard Quantity – Actual Quantity ) Or Standard Cost of Standard Mix – Standard cost of Actual Mix Sometimes due to shortage of a particular type of material, standard is revised; then: Standard unit cost (Revised Standard Quantity – Actual Quantity) Or Standard cost of revised Standard Mix – Standard Cost of Actual mix If the actual weight of mix differs from the standard weight of mix, then: Standard cost of revised standard mix × Total weight of actual mixmixTotal weight of revised standard mix |
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Material Yield Variance |
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When the standard and the actual mix do not differ, then Yield Variance = Standard Rate × (Actual Yield – Standard Yield) Standard Rate = Standard cost of standard mixNet standard output (i.e.Gross output−Standard loss) |
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