Editing Direct material price variance

{{Unreferenced|date=December 2009}}
In [[variance analysis (accounting)]] '''direct material price variance''' is the difference between the [[standard cost]] and the [[actual cost]] for the [[actual quantity]] of material purchased. It is one of the two components (the other is [[direct material usage variance]]) of [[direct material total variance]].

==Example==
Let us assume that the standard direct material cost of [[Widget (economics)|widget]] is as follows:
:2 kg of [[unobtainium]] at € 60 per kg ( = € 120 per unit). 
Let us assume further that during the given period, 100 widgets were manufactured, using 212&nbsp;kg of [[unobtainium]] which cost € 13,144.

Under those assumptions direct material price variance can be calculated as:
{{Infobox VarianceAnalysis VarianceBox|tx1=212 kg of [[unobtainium]] should have cost (× € 60)
|tx2=but did cost
|tx3=Direct material ([[unobtainium]]) price variance
|am1=12,720
|am2=13,144
|am3=424
|va1=A
}}
Direct material price variance can be reconciled to [[direct material total variance]] by way of [[direct material usage variance]]:
{{Infobox VarianceAnalysis VarianceBoxRec|tx1=Direct material usage variance
|tx2=Direct material price variance
|tx3=Direct material total variance
|am1=720
|am2=424
|am3=1,144
|va1=A
|va2=A
|va3=A
}}
spending variance seen as per product cost
(212*62)-(200*60)
See [[direct material total variance#Example]] and [[direct material usage variance#Example]] for computations of both components.

==See also==
*[[Variance analysis (accounting)]]

==References==
{{reflist}}

{{DEFAULTSORT:Direct Material Price Variance}}

[[Category:Management accounting]]