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how to calculate planning material price variance?

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how to calculate planning material price variance?
  1. (Original price ~revised price) x actual units x revised standard quantity
    Or
  2. (Original ~ revised ) x actual quantity of material used

Which method need to be used ?

November 12th 2014 AN ACCA USER 130 Points 1 Flag

4 Replies

0 Votes

Hi, here is the pro forma from LSBF :
Materials variances

                                Planning                                            Operational

                               SQSP                                                   RSQRSP

USAGE
RSQSP AQRSP

PRICE
RSQRSP AQAP

November 12th 2014 AN ACCA USER 8,970 Points
0 Votes

If you want to see how the pro forma is properly presented on the previous answer please click "EDIT" on my previous answer and it will appear normally.

November 12th 2014 AN ACCA USER 8,970 Points
0 Votes

1) Planning Material price variance: AQ RSP and AQ SP. Planning material usage variance: RSQap SP and SQap SP.
2) operational material price variance : AQ AP and AQ RSP. Operational material usage variance: AQ SP and RSQap SP.
NOTES: AQ= actual quantity, RSP= revised standard price, SP= standard price, SQap= standard quantity for actual production, RSQap= revised standard quantity for actual production.
Now you have the original method and this applies to sales material and labour. As regards sales,instead of standard price it is standard contribution (if marginal costing used) or standard profit (if absorption costing used), as regards material (already done above), as regards labour, instead of standard price it's standard rate.

November 17th 2014 AN ACCA USER 8,970 Points
0 Votes

I think both methods are correct. It is just a matter of consistency. You should use the same quantity for material planning usage. For me, I do prefer the second one. :)

November 26th 2014 AN ACCA USER 240 Points
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