Direct Materials Price Variance

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on June 08, 2023

Materials price variance (or direct materials price variance) is the part of materials cost variance that is attributable to the difference between the actual price paid and the standard price specified for direct materials.

Materials price variance represents the difference between the standard cost of the actual quantity purchased and the actual cost of these materials.

Although materials price variance may not be controllable, it provides management with important information for planning and decision-making purposes.

Knowledge of this variance may prompt a company's management team to increase product prices, use substitute materials, or find other offsetting sources of cost reduction.


Materials Price Variance Formula


The data relating to the direct materials cost of Hampton Appliance Company for the month of January 2016 is given below:

  • Actual price: $6 per unit
  • Standard price: $5.25 per unit
  • Actual quantity purchased: 5,000 units

Required: Calculate the direct materials price variance for Hampton Appliance Company for the month of January 2016.


Materials Price Variance Calculation

The direct materials price variance of Hampton Appliance Company is unfavorable for the month of January. This is because the actual price paid to buy 5,000 units of direct material exceeds the standard price.

Direct Materials Price Variance FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.