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Definition

Materials price variance

Materials price variance is the difference between the actual quantity times the actual price and the actual quantity times the standard price for materials.

The materials price variance is computed from the following formula.

(Actual Quantity * actual Price) – (Actual Quantity * Standard Price) = Materials Price Variance (MPV)

The price variance can also be computed by multiplying the actual quantity purchased by the difference between the actual and standard price per unit. The formula is

Actual Quantity * (Actual Price – Standard Price) = Materials Price Variance.

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