Materials Price Variance

This video shows how to calculate the Materials Price Variance.  

The Materials Price Variance is the difference between:  
(1) actual quantity purchased * actual purchase price
and
(2) actual quantity purchased * standard purchase price
This is sometimes abbreviated as:  (AQ * AP) - (AQ * SP)

If the company spent more than it should have (according to the standard, which is set by management), then the materials price variance is unfavorable.  If the variance is large enough you should speak with the purchasing manager to identify the source of the problem (perhaps prices in the industry increased, perhaps the purchasing manager isn't getting good deals, etc.).—
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