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How would material variances be calculated if inventories are valued at standard cost?
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
CathHi 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?
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