Material Cost Variance

Material Cost Variance

Material Cost Variance (MCV) is the difference between the standard cost of the material allowed (standard material) for the output to be achieved and the actual cost of the material used.

Formula

The formula to compute Material Cost Variance is as follows:

Material Cost Variance = Standard Cost of the Material for Actual Output – Actual Cost of the Material Used

OR

Material Cost Variance = Material Price Variance + Material Usage or Quantity Variance

OR

Material Cost Variance = Material Price Variance + Material Mix Variance + Material Yield Variance

In order to compute the MCV, it is required to know:

a. Standard quantity of the materials that should have been required to produce the actual output. Hence, the standard quantity of materials is = Actual Output x Standard Quantity of the Materials Per Unit

b. Standard Price Per Unit of Materials

c. Actual Quantity of Materials Used

d. Actual Price Per Unit of Materials

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