The formulas
- Price variance = (actual price - standard price) x actual quantity
- Quantity variance = (actual quantity - standard quantity allowed) x standard price
- Total = actual cost - standard cost allowed
How it works
Standard costing compares what a job did cost to what it should have cost. The price variance isolates the effect of paying more or less per unit, and the quantity variance isolates using more or less material than the standard allows for the output made.
This version assumes the quantity purchased equals the quantity used. If they differ, compute the price variance on the quantity purchased and the quantity variance on the quantity used. Variances are leads for investigation, and the cause may sit with purchasing or with production.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
What is standard quantity allowed?
The standard input per unit times the actual units produced.
Does positive mean bad?
Here yes. A positive variance means actual cost is above standard.
How do variances affect inventory?
Entities treat them differently. Material variances may be capitalized into inventory or expensed, so check the policy.
Formulas on this page are the standard definitions.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.