Price variance

Price variance measures the cost effect of the actual input price differing from the standard price, with actual quantity held constant.

Also known asrate variance

ByHoang TruongUpdated June 30, 2026

FrameworkStandard costing

See it move

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A waterfall chart opens at the standard direct-material cost of €80,000, then adds a single adverse upward step of +€6,000 labelled Price adverse, closing at an actual cost of €86,000. The chart illustrates that paying €0.30 more per metre than the standard price on 20,000 metres purchased produces an unfavourable direct-material price variance of €6,000.

Where it fits

SubjectManagerial AccountingCoreTopicStandard Costing & Variance AnalysisCore

The formula

LaTeX

(AP - SP) \times AQ

Variables

$A P$: Actual price paid per unit of input (€ per unit)
$S P$: Standard price per unit of input (€ per unit)
$A Q$: Actual quantity of input purchased (units)

Positive result = adverse (actual exceeded standard); negative = favourable.

Check yourself

PracticeCORE

Aldos Manufacturing sets a standard material price of €5.00 per kg. In March, the purchasing department buys 8,000 kg at €5.40 per kg. The standard quantity allowed for actual production is 7,600 kg. What is the materials price variance?

Select an answer to check your understanding.