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Direct Material Price Variance Formula:
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Direct Material Price Variance (DMPV) is a cost accounting metric that measures the difference between the actual price paid for materials and the standard price, multiplied by the actual quantity purchased. It helps identify purchasing efficiency and cost control effectiveness.
The calculator uses the DMPV formula:
Where:
Explanation: A positive variance indicates unfavorable performance (paying more than standard), while a negative variance indicates favorable performance (paying less than standard).
Details: DMPV analysis helps organizations monitor purchasing performance, identify cost savings opportunities, evaluate supplier performance, and maintain budget control in material procurement.
Tips: Enter actual price, standard price, and actual quantity in the respective fields. All values must be non-negative numbers. The result will show the variance amount in currency units.
Q1: What does a positive DMPV indicate?
A: A positive DMPV indicates an unfavorable variance, meaning the company paid more for materials than the standard price.
Q2: What does a negative DMPV indicate?
A: A negative DMPV indicates a favorable variance, meaning the company paid less for materials than the standard price.
Q3: What factors can cause material price variances?
A: Market price fluctuations, supplier changes, purchase quantity discounts, quality differences, and transportation costs can all contribute to price variances.
Q4: How often should DMPV be calculated?
A: DMPV is typically calculated for each purchasing transaction or summarized periodically (weekly, monthly) to track purchasing performance trends.
Q5: Who is responsible for DMPV in an organization?
A: The purchasing department is typically responsible for material price variances, though procurement policies and supplier relationships may involve multiple departments.