Concepts behind Material Price Variance
Material Price Variance is a subcategory of Variance Analysis in which the variance is calculated for the price of the materials consumed or used for production.
In Material Price Variance, the variation is calculated by deducting the price of the materials as per planned standards from the price of the materials that was actually incurred. The difference arising is referred to as Material Price Variance.
There are two main components of Material Price Variance which are the price of the materials as well the quantity of the materials.
Calculation of Material Price Variance:
MPV = (SP - AP) x Q
MPV is Material Price Variance
SP is Standard or Estimated Price
AP is Actual Price
Q is quantity
The main purpose of calculating Material Price Variance is to determine how efficient the purchase department of a company is in obtaining the materials at the lowest possible cost.
If the value of the Material Price Variance is positive, it implies that the materials were purchased at a cost which was lower than what was estimated. If the value of the Material Price Variance is negative, it implies that the materials were purchased at a cost which was higher than what was estimated.
There can also be an alternative observation for the positive or negative value of Material Price Variance. It could also imply the quantity which was estimated at the beginning while setting standards has a variation which at times may be favorable and at times can be unfavorable.
There can be a lot of causes and reasons why the Material Price Variance is positive or negative.
Let us see a few of the causes for favorable and unfavorable Material Price Variance:
Causes for positive material Price variance:
- A decrease in the prices of the raw materials in the business environment.
- Bargaining in the prices or obtaining discounts in the price of the raw materials by the purchase department.
- Purchasing inferior quality products instead of the quality decided upon during planning.
- Saving on cost by purchasing in bulk
- Saving on cost by making cash payments and obtaining cash discounts.
- Using practices which lead to a cheaper cost for materials followed by the purchase department.
Causes for a negative material Price variance:
- An increase in the price of the raw materials in the market
- Suppliers refusing to provide any kind of discount on the goods and raw materials.
- Purchasing higher quality products instead of the one specified while setting budgets.
- Ordering raw materials in small quantities allowing for no room to get any discounts.
- Buying goods in credit which does not allow for any cash discounts.
- Purchase department using inadequate practices which are not efficient leading to a high cost for raw materials.
One of the most essential parts of Material Price Variance is the calculation of standard Material Prices. The prices need to be in sync with the changing business environment and should consider inflation and price hikes while calculating.
Difficulties Encountered In Material Price Variance
While calculating Material Price Variances, a lot of factors have to be kept in mind. In order to calculate difference in the Standard or estimated prices. At times, the prices are given in either unit wise or as a sum total. Depending on the question, there needs to be calculation of the standard price in terms of the solution to the problem.
The numbers are usually complex and require lot calculations in order to arrive to the variation in the material price or material price variance.
Also, the factors like quantity and other transactions affecting the price of the raw material are confusing in the problems and make the students baffled as to what value is to be used for what element. At times, there may be one or the other element missing from the problem and requires efforts in finding that element as well within the solution.
Help with Material Price Variance Assignment - Homework
If you are a student who is looking for help in solving their Material Price Variance, you have stumbled across the right platform. Our platform allows for easily getting your problems solved by experts from all across the world. All you have to do is go to our site and post your problems along with the guidelines and the submission date. We will connect your assignment to one of the best and the most relevant experts that we have on board and get it solved accurately for you.
We only provide the best to our solutions and do not compromise on quality at all. We are well trusted and well known for the quality of the work that we provide to them. For us, the satisfaction of the students always comes first. We try our best to increase the user experience satisfaction.
Why Us For Accounting Assignment Help?
We have many reasons to our credit when we say that we are one of the most trusted and used sites by students from all around the world.
Our affordable and nominal rates attract students to come and post their problems to our site as it helps them manage their pocket money without any stress. The quality of assignments and solutions we deliver is something we are proud of. We have a quality check procedure happening for every assignment. Our experts take up every assignment with utmost importance and provide their best of knowledge to ensure that the solution and the assignment and analysis are done accurately and are easy to understand.
We are available at your service 24x7 and you can connect with us at any time of the day. In case you have any issues, you can get in touch with us and we will try our best to resolve the issue.
We deliver 100% original assignments which are free from plagiarism and are not copied from anywhere on the internet. Our sole purpose is to ensure that all our students have a stress free academic year without having to worry about their assignments at all.
Accounting Assignment Help - Homework Help from Qualified and Experienced Expert Writers
We offer assignment help service online which is most popular and liked all over the world. Our experts are helping students for preparing accounts assignments with step by step explanations. The accounting writers not just help in writing assignments but also provide better learning of accounting concepts. Our accounting assignment help service has covered all sub-domains and topics under accounting. We offer accounting assignment help, accounting homework help, other writings services including accounting term papers writing help, essays, research papers, case studies or case analysis writing help, and paper editing, formatting and referencing services.
Few simple steps to get your accounting assignments done online!
- Ask an Expert - Submit requirement
- Get quote and make payment
- Work is allocated to Accounting Writers
- Sent to you after completion and quality check
- Unlimited revisions till you are done.
Glossary- Material Price Variance Assignment Help, Material Price Variance Homework Help, Material Price Variance Assignment Tutors, Material Price Variance Solutions, Material Price Variance Answers, Performance Metrics Assignment Tutors