Standard costing

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 March 2012 meterial price variance = AQ(SP-AP)
meterial usage variance = SP(SQ-AQ)

in price variance we multiply difference in price with actual quantity where as in usage variance we multiply differece in quantity not with actual price but with standard price.
why?
what is the concept?

CA. Aryendra

CA. Aryendra (Expert)
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11 March 2012 Price variance we use actual quantity because we want to know what in the role of price in out executed (actual ) project due to the wrong estimation of price.

While in usage variance we just want to know the variation in material use. because usage mean variation in material use not in the price. price is other factor.

CA. Aryendra

CA. Aryendra (Expert)
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