Material Variances and Inventory Valuation

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

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?

Hi Material usage variance should always be calculated on materials consumed or used in the period (not purchased). Hope this helps Cath