Since it simplifies bookkeeping, management can deliver variance reports more quickly, and it enables supplies to be carried in the inventory accounts at standard cost, the materials price variance is typically established at the time of purchase.
An unfavorable materials price variance happens if the actual price paid for the materials is higher than the standard price. A beneficial materials price variance occurs, however, if the actual cost of the materials is lower than the benchmark cost.
Variance in managerial accounting refers to the difference between real costs and standard costs. The difference between the actual price paid for materials and the standard price is known as the materials price variance.
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