Most firms figure out the material quantity variance and the material price variance when materials are purchased.
When the actual price paid for materials used in manufacturing differs from the standard price for the materials, this is referred to as a material price variation (MPV). If the actual price paid for the materials is less than the standard price, the material price variance will be beneficial. Subtract the actual price per unit of material from the budgeted price per unit of material, then multiply by the actual quantity of direct material used to determine the material price variance. The equation is:
Actual quantity used x (Actual price - Standard price) equals the difference in material prices.
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