Materials worked example
Material Price Variance with standard price of 6 $ / unit: a worked example
Push standard price up to 6 $ / unit and the picture changes. This example computes every intermediate figure at that operating point. Use in purchasing, quoting, or operations reviews when material price changes affect margin.
The inputs for this scenario
- Standard price: 6 $ / unit (raised for this scenario; the documented default is 2.4)
- Actual price: 2.68 $ / unit (unchanged)
- Quantity: 18,000 units (unchanged)
- Annual usage: 96,000 units / yr (unchanged)
Working through the calculation
- Applying the documented formula (Price variance = (actual price − standard price) × quantity) to the inputs above produces each figure below.
- At this operating point the engine returns -59,760 $ for price variance, the number this scenario is built around.
- At this operating point the engine returns -3.32 $ / unit for variance per unit.
- At this operating point the engine returns -318,720 $ / yr for annualized impact.
- At this operating point the engine returns 48,240 $ for actual material cost.
How this compares with the baseline
- Against the tool's baseline example, where standard price sits at 2.4 $ / unit and the headline result is 5,040 $, this scenario comes in 1,286% below the baseline at -59,760 $.
- It computes the price variance for a purchased material as (actual price minus standard price) times the quantity bought, plus the per-unit gap and its annualized cost impact. The value of this scenario is the size of the gap it exposes: that gap, priced out over a year, is the budget you can justify spending to close it.
Results at a glance
- Price variance: -59,760 $ (headline result)
- Variance per unit: -3.32 $ / unit
- Annualized impact: -318,720 $ / yr
- Actual material cost: 48,240 $
Run it with your numbers
- Every input above is editable in the live Material Price Variance calculator, which recalculates instantly and can be shared with the inputs intact.
Last reviewed 2026-05-12.