What is Purchase Price Variance ?
Purchase Price Variance (PPV) is a financial metric used in cost accounting to assess the difference between the actual cost of purchasing goods or materials and the standard or budgeted cost. It measures the impact of price fluctuations on procurement expenses and helps businesses understand the efficiency of their purchasing processes. The calculation of PPV involves comparing the actual purchase price per unit with the standard purchase price per unit, multiplied by the actual quantity purchased. A positive PPV indicates that goods were purchased at a lower cost than expected, resulting in cost savings, while a negative PPV suggests that goods were acquired at a higher cost than anticipated, potentially impacting profitability. PPV analysis is crucial for businesses to identify cost-saving opportunities, evaluate supplier performance, and make informed decisions regarding procurement strategies.
How to Calculate Purchase Price Variance?
Purchase Price Variance calculator uses Purchase Price Variance = (Actual Cost Incurred-Standard Cost)*Actual Quantity to calculate the Purchase Price Variance, The Purchase Price Variance is the difference between the actual cost of acquiring goods or materials and the standard or budgeted cost, indicating the impact of price fluctuations on procurement expenses. Purchase Price Variance is denoted by PPV symbol.
How to calculate Purchase Price Variance using this online calculator? To use this online calculator for Purchase Price Variance, enter Actual Cost Incurred (ACI), Standard Cost (SC) & Actual Quantity (ACQ) and hit the calculate button. Here is how the Purchase Price Variance calculation can be explained with given input values -> 2280 = (254-230)*95.