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Split a materials variance into price and usage

  • For FP&A and financial analysts
  • You practice Catching mistakes and made-up facts
  • Time about 5 minutes
  • Level Intermediate

About this exercise

You're explaining a materials cost variance for the month. Write a prompt for plain text with lines starting "Price variance:", "Usage variance:", "Total variance:" and "Check:", each with the math. Price variance = (actual price - standard price) x actual quantity. Usage variance = (actual quantity - standard quantity allowed) x standard price. Positive means unfavorable. Don't state causes or blame a supplier. Under 80 words. No bullets or numbering.

Common mistakes when you ask AI for this

  • Using the wrong bases. The AI uses standard quantity for the price variance. Try: Say: "Price variance uses actual quantity; usage variance uses standard price."
  • Repeating the explanations. The AI says the supplier raised prices and scrap caused the usage. Try: Add: "Do not give causes or mention suppliers, scrap or machines."
  • No check. The AI never ties the split back to total cost. Try: Add: "Check: actual cost minus standard cost."
  • Markdown extras. The AI adds bold labels, headings and a closing note. Try: Say: "Plain text, no bold. Output only the lines asked for."
  • Trusting the AI to count words. AI is bad at counting and runs past word limits. Try: Ask for fewer words than the real cap and keep each line short.

What a strong prompt includes

  • Names the four lines
  • Gives the formulas
  • Asks for the check
  • Bans causes
  • Caps length

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