State material price variance, Managerial Accounting

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State Material price variance

Difference among standard price and the actual price of the material is the material price variance. This variance arises because of various factors such as:

Change in market price

Uneconomical size of purchase order

Not availing of discount facilities

Payment of more/less freight cartage charges etc.

Transits loss, if barns by the purchase

Change in duties and taxes etc

Material price variance is the direct responsibility of the purchase department. Certain situation may arise when material price variance is made uncontrollable, as price depends on the factors of demand and supply in the market. In such a case the purchase department or other personnel is not accountable for the variance.

Material price variance is stated as:

Defective equipment and tools

Use o inferior material

Change in composition of material mixture

Yield form material more/less etc.

 


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