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Cost and Management Accounting · Standard Costing

Material Cost Variances: Price, Usage, Mix and Yield

Updated 4 October 2026 · Fact-checked

Material cost variances compare the standard cost of materials for actual output with the actual cost. The total splits into price, AQ × (SP − AP), and usage, SP × (SQ − AQ). Usage splits further into mix, SP × (RSQ − AQ), and yield, SP × (SQ − RSQ). Positive is favourable; negative is adverse.

Understand Material Cost Variances

Standard costing sets a standard quantity and a standard price for each material. A variance is the gap between what the output should have cost and what it actually cost. Variances tell management where money was lost or saved.

The material cost variance (MCV) is the total gap. It has two causes. Either you paid a different price per unit (price variance), or you used a different quantity than allowed (usage variance). Price is a buying issue. Usage is a production issue.

When a product uses more than one material, usage splits again. Mix variance shows the effect of using the materials in a different proportion from the standard mix. Yield variance shows the effect of getting more or less output than the total input should give. The key is standard quantity (SQ): the quantity allowed for the actual output, not the budgeted output.

The bridge between mix and yield is the revised standard quantity (RSQ). It is the actual total input, re-divided in the standard mix proportion. Compared with actual quantity (AQ), RSQ isolates the mix effect. Compared with SQ, it isolates the yield effect.

Sign rule: if the actual result is better for profit than standard, the variance is favourable (F). Otherwise it is adverse (A). Always label every answer F or A.

Key rules to remember

Material cost variance (MCV)
MCV = (SQ × SP) − (AQ × AP)
SQ is standard quantity for actual output. Positive = favourable, negative = adverse.
Material price variance (MPV)
MPV = AQ × (SP − AP)
Use quantity purchased if price variance is isolated at purchase. Use quantity consumed if isolated at consumption.
Material usage variance (MUV)
MUV = SP × (SQ − AQ)
AQ is the quantity actually used in production. It is always valued at standard price.
Material mix variance (MMV)
MMV = SP × (RSQ − AQ)
Equivalent: standard cost of RSQ − standard cost of AQ. Applies only when two or more materials are used.
Revised standard quantity (RSQ)
RSQ of a material = Total actual input quantity × (Standard quantity of that material ÷ Total standard quantity)
Total of RSQ equals total of AQ. Only the proportions differ.
Material yield variance (MYV)
MYV = SP × (SQ − RSQ)
Equivalent: standard cost per unit of output × (actual output − standard output for actual input).
Relationships
MCV = MPV + MUV; MUV = MMV + MYV
Use these as a check. Add signs algebraically, treating F as + and A as −.

How to solve Material Cost Variances questions

Follow the same order every time. It keeps the work neat and gives you built-in checks.

  1. 1Write the standard data: quantity, price and cost of each material for the standard batch or per unit of output.
  2. 2Compute SQ for each material from the actual output. Scale the standard to actual output. If there is a standard loss, scale on the input needed for that output.
  3. 3List actual data: AQ, AP and actual cost for each material. Total the actual cost.
  4. 4Compute MCV = standard cost of SQ − actual cost. Then MPV and MUV for each material.
  5. 5If there is more than one material, compute total AQ and then RSQ for each material in the standard mix proportion.
  6. 6Compute MMV = SP × (RSQ − AQ) and MYV = SP × (SQ − RSQ) for each material. Add them across materials.
  7. 7Check that MPV + MUV = MCV and MMV + MYV = MUV. Label every figure F or A.
  8. 8Add one line of interpretation, for example: adverse usage is mainly due to excess yield loss.

Quickest way: Columns method with the check totals

When to use it: Use it for any question with two or more materials, especially in the MCQ section and long numericals.

  1. Draw columns for SQ, RSQ and AQ, each valued at SP, and a column for AQ × AP. Rows are the materials.
  2. Compute the four totals: SQ × SP, RSQ × SP, AQ × SP and AQ × AP.
  3. Read the variances by subtraction: MYV = SQ×SP − RSQ×SP; MMV = RSQ×SP − AQ×SP; MPV = AQ×SP − AQ×AP.
  4. Check: MCV = SQ×SP − AQ×AP. For MCQs, estimate the sign first and eliminate options with the wrong F or A.
  5. For a written answer, show the formula, the substitution and the F or A label for each variance. This earns step marks even if one figure is wrong.

Common mistakes in Material Cost Variances

  • Using budgeted output instead of actual output to find SQ

    Students copy the standard quantity from the data without scaling it.

    Fix: Always compute SQ = standard quantity per unit × actual output. The comparison must be at the actual level of activity.

  • Valuing the usage, mix or yield variance at actual price

    Students mix up the price variance formula with the quantity variance formulas.

    Fix: Price variance uses AQ and the price difference. All quantity variances (usage, mix, yield) use standard price only.

  • Calculating RSQ from the standard total instead of the actual total input

    Students think RSQ is just the standard mix applied to standard input.

    Fix: RSQ = total actual input × standard proportion. Check that total RSQ equals total AQ.

  • Getting the sign wrong, so that mix plus yield does not equal usage

    Students reverse the order of subtraction in some formulas.

    Fix: Use standard minus actual for quantity: SQ − AQ, RSQ − AQ, SQ − RSQ. Then positive means favourable. Always run the check MUV = MMV + MYV.

  • Confusing price variance on purchase with price variance on consumption

    Students use the quantity used even when the question says the price variance is isolated at purchase.

    Fix: Read the question. If it says at purchase, use quantity purchased in MPV. If at consumption, use quantity consumed. Usage variance always uses quantity consumed.

  • Calculating mix variance for a single material

    Students apply the full formula set to every question.

    Fix: With one material there is no mix. Usage variance is then the only quantity variance.

Worked examples

Example 1

A product has a standard material requirement of 4 kg per unit at a standard price of ₹25 per kg. In a month 1,000 units were produced. Actual consumption was 4,200 kg at ₹24 per kg, so actual cost was ₹1,00,800. Calculate the material cost, price and usage variances.

Show the solution
  1. SQ = 4 kg × 1,000 units = 4,000 kg.
  2. Standard cost of actual output = 4,000 × ₹25 = ₹1,00,000.
  3. MCV = ₹1,00,000 − ₹1,00,800 = ₹800 (A).
  4. MPV = AQ × (SP − AP) = 4,200 × (₹25 − ₹24) = ₹4,200 (F).
  5. MUV = SP × (SQ − AQ) = ₹25 × (4,000 − 4,200) = ₹5,000 (A).
  6. Check: ₹4,200 (F) − ₹5,000 (A) = ₹800 (A), which equals MCV.

Answer: MCV = ₹800 (A); MPV = ₹4,200 (F); MUV = ₹5,000 (A). The saving on price was more than wiped out by the excess usage of 200 kg.

Example 2

The standard mix to produce 90 kg of output is: Material A 60 kg at ₹20 per kg and Material B 40 kg at ₹30 per kg (total input 100 kg). Actual output was 900 kg. Actual input was A 650 kg at ₹22 per kg and B 450 kg at ₹28 per kg. Calculate the material cost, price, usage, mix and yield variances.

Show the solution
  1. SQ for output of 900 kg: input needed = 900 × 100 ÷ 90 = 1,000 kg. So SQ of A = 600 kg and SQ of B = 400 kg.
  2. Standard cost of SQ = 600 × ₹20 + 400 × ₹30 = ₹12,000 + ₹12,000 = ₹24,000.
  3. Actual cost = 650 × ₹22 + 450 × ₹28 = ₹14,300 + ₹12,600 = ₹26,900.
  4. MCV = ₹24,000 − ₹26,900 = ₹2,900 (A).
  5. MPV: A = 650 × (₹20 − ₹22) = ₹1,300 (A). B = 450 × (₹30 − ₹28) = ₹900 (F). Total = ₹400 (A).
  6. MUV: A = ₹20 × (600 − 650) = ₹1,000 (A). B = ₹30 × (400 − 450) = ₹1,500 (A). Total = ₹2,500 (A).
  7. Total actual input = 650 + 450 = 1,100 kg. RSQ: A = 1,100 × 60 ÷ 100 = 660 kg; B = 1,100 × 40 ÷ 100 = 440 kg.
  8. MMV: A = ₹20 × (660 − 650) = ₹200 (F). B = ₹30 × (440 − 450) = ₹300 (A). Total = ₹100 (A).
  9. MYV: A = ₹20 × (600 − 660) = ₹1,200 (A). B = ₹30 × (400 − 440) = ₹1,200 (A). Total = ₹2,400 (A).
  10. Checks: MMV + MYV = ₹100 (A) + ₹2,400 (A) = ₹2,500 (A) = MUV. MPV + MUV = ₹400 (A) + ₹2,500 (A) = ₹2,900 (A) = MCV.

Answer: MCV = ₹2,900 (A); MPV = ₹400 (A); MUV = ₹2,500 (A); MMV = ₹100 (A); MYV = ₹2,400 (A). The main problem is yield: 1,100 kg of input should have given 990 kg of output, but only 900 kg came out.

Exam tips

  • Write SQ, RSQ and AQ in a small table before any formula. Most errors start with a wrong SQ or RSQ.
  • Always run the two checks: MPV + MUV = MCV and MMV + MYV = MUV. If a check fails, fix it before moving on.
  • In MCQs, work out the sign first. Many options differ only in F or A, so you can eliminate half of them quickly. There is no negative marking, so always attempt every MCQ.
  • Read whether the question wants price variance on purchase or on consumption, and whether there is a standard loss. Both change the quantity you use.
  • In written answers, state the formula, show the substitution, give the F or A label and add one line of cause. Step marks are given even if the final figure is wrong.

Practice questions from Standard Costing

Material Cost Variances in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Material Cost Variances: frequently asked questions

What is the difference between material mix variance and material yield variance?

Mix variance measures the effect of using materials in a proportion different from the standard mix. It compares RSQ with AQ at standard price. Yield variance measures the effect of the total input giving more or less output than standard. It compares SQ with RSQ at standard price.

How do I calculate revised standard quantity?

Add up the total actual input of all materials. Then split it in the standard mix ratio. For a material, RSQ = total actual input × its standard quantity ÷ total standard quantity. The RSQ of all materials add up to the total AQ.

Is material price variance calculated on purchase or on consumption?

It depends on where the company isolates the variance. On purchase basis, use the quantity purchased, so the price variance is known early. On consumption basis, use the quantity consumed. The question will state which to use. Usage variance is always based on quantity consumed.

How do I calculate material usage variance quickly?

Find SQ for actual output, subtract AQ, and multiply by standard price. A positive result is favourable and a negative result is adverse. With several materials, calculate it for each and add. It should equal mix plus yield variance.