In one sentenceThe difference between what you actually paid for materials and what you would have paid had you bought the same quantity at the standard price you planned.
Simply put
Before the year starts you set a “standard price” for each material, meaning the price you expect to buy at. When you actually buy, you compare: if you paid more the variance is unfavorable because it raises cost, and if you paid less it is favorable.
This variance is usually the responsibility of purchasing management, because it negotiates with suppliers and chooses when to buy.
Worked example
A confectionery factory planned to buy sugar at 10 SAR per kilo and bought 2,100 kilos at 11 SAR.
Quantity actually purchased2,100 kg
Actual price − Standard price11 − 10 = 1 SAR
Variance = 1 × 2,100 (unfavorable)2,100 SAR
Formula: (Actual price − Standard price) × Actual quantity purchased
Don't confuse it with
Material quantity varianceDid you use more than production required? That is the responsibility of production, not purchasing.
in FullScreen ERP
Supplier price comparison shows the last price and the best price for each item from each supplier. Purchasing and suppliers