Hi Phuc,
Kindly keep in mind when you are calculating material price variance, it doesn't matter how much material you used for production but material purchased matters.
(Standard rate-actual rate) X Actual quantity purchased is a right formulae.
Material price variance is to be calculated keeping in mind company's purchase department who are responsible for the rates.
But when calculating Material usage variance, you should keep in mind company's production department who are responsible for variances in production, using formulae (Standard Material used-Actual Material Used) X Standard rate.
Final Conclusion-------Material Purchased is for Material Price variance and Material used for production is for Material Usage Variance.
Get back to me, if you still have a doubt.
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Tejas Doke
Accountant
Dombivli MH
India
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Original Message:
Sent: 06-21-2021 10:10 AM
From: Phuc Ngo Mai Thien
Subject: 1C Raw material price variance
Hi everyone,
The question requires the Raw material price variance, I calculate it with the formula
490,000 × ($2.02 − 2) = $9,800 Unfavorable
The solution actually calculates the Purchased raw material price variance as follow:
500,000 × ($2.02 − 2) = $10,00 Unfavorable
Could anyone please help me explain its solution?
Thank you in advance,