State Material price variance
Difference among standard price and the actual price of the material is the material price variance. This variance arises because of various factors such as:
Change in market price
Uneconomical size of purchase order
Not availing of discount facilities
Payment of more/less freight cartage charges etc.
Transits loss, if barns by the purchase
Change in duties and taxes etc
Material price variance is the direct responsibility of the purchase department. Certain situation may arise when material price variance is made uncontrollable, as price depends on the factors of demand and supply in the market. In such a case the purchase department or other personnel is not accountable for the variance.
Material price variance is stated as:
Defective equipment and tools
Use o inferior material
Change in composition of material mixture
Yield form material more/less etc.