How to Record Material Price Variances
Isolates the difference between the actual price paid for raw materials and the standard cost.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Raw Materials (Standard) | Asset | 2,000.00 | - |
| Purchase Price Variance | Expense | 200.00 | - |
| Accounts Payable (Actual) | Liability | - | 2,200.00 |
💡 Accountant's Note
Standard costing records inventory at a fixed rate. Any excess paid (unfavorable variance) is debited to a variance account to monitor procurement efficiency.
Practitioner & Systems Framework
💻 ERP Architecture
Configured in the material master data where 'Price Control' is set to Standard (S).
⚠️ Audit Flags
Unusually high favorable or unfavorable variances compared to budget.
📄 Required Documentation
Standard cost card and vendor invoice.
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