The price variance of a material

Material

Material is anything made of matter, constituted of one or more substances. Wood, cement, hydrogen, air and water are all examples of materials. Sometimes the term "material" is used more narrowly to refer to substances or components with certain physical properties that are used as inputs to...

 is computed as follows:

Vmp = (Actual unit cost

Unit cost

The unit cost of a product is the cost per standard unit supplied, which may be a single sample or a container of a given number. When purchasing more than a single unit, the total cost will increase with the number of units, but it is common for the unit cost to decrease as quantity is increased...

 - Standard unit cost) * Actual Quantity Purchased

or

Vmp = (Actual Quantity Purchased * Actual Unit Cost) - (Actual Quantity Purchased * Standard Unit Cost).

When the Actual Materials Price is higher than the Standard Materials Price, the variance

Variance

In probability theory and statistics, the variance is a measure of how far a set of numbers is spread out. It is one of several descriptors of a probability distribution, describing how far the numbers lie from the mean . In particular, the variance is one of the moments of a distribution...

 is said to be unfavorable, since the Actual price paid on materials purchased is greater than the allowed standard. The variance is said to be favorable when the Standard materials Price is higher than the Actual Materials Price, since less money

Money

Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...

was spent in purchasing the materials than the allowed standard.