The materials price variance should be computed when materials are purchased

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The materials price variance should be computed when materials are purchased. This variance helps in analyzing the difference between the actual cost paid for materials and the standard cost assigned. Additionally, the direct materials price and quantity variances are calculated to determine the efficiency and effectiveness in materials usage during production. The direct materials price variance shows the difference between the actual price paid for a material and the standard cost per unit. Conversely, the direct materials quantity variance shows the difference between the actual consumption of a material and the standard consumption per unit. These variances help in cost control and improvement by showing where efficiencies can be made in the materials procurement and usage process.

The Materials Price Variance Should Be Computed When Materials Are