Material Variances and Inventory Valuation

This topic has 3 replies, 2 voices, and was last updated 7 years ago by Cath.

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May 10, 2018 at 9:40 pm #451145
khawarbutt
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How would material variances be calculated if inventories are valued at standard cost?
May 10, 2018 at 9:56 pm #451150
Cath
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Material Usage variance is measured at standard cost – as it always is.
Material Price variance compares actual cost of material to the standard cost – the value of the variance is equal to the difference – so its not valued at either.
Material Price Variance = AQ * (AP – SP)
Kind Regards
Cath
May 11, 2018 at 8:14 am #451176
khawarbutt
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Hi Cath,
Thank you for your quick reply. It makes sense but my question is when there is opening & closing inventory which has been measured at std cost, would we calculate the variance using materials purchased or materials consumed?
May 20, 2018 at 2:22 pm #452979
Cath
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Hi
Material usage variance should always be calculated on materials consumed or used in the period (not purchased).
Hope this helps
Cath
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