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The material cost variance denoting the difference between the standard cost of materials and actual cost of matrials. The material cost variance is between the standard material cost for actual production in units and actual cost.

The total cost is usually determined by two differenct factors of influence viz quantity of materials utilized/ required and price of the materials. The fluctuations in the material cost are only due to the fluctuations in the utility of materials due to many factors.

Material cost variance can be computed into two different ways:

DIRECT METHOD AND INDIRECT METHOD

material cost variance= Standard cost of materials for actual output- actual cost of raw materials.

MCV=(S Q AO X SP)-(AQ X AP)

Indirect Method:

material cost variance= Material price variance (MPV)+Material usage Variance

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Q: What is material cost variance?
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