Purchase Price Variance Solution

STEP 0: Pre-Calculation Summary
Formula Used
Purchase Price Variance = (Actual Cost Incurred-Standard Cost)*Actual Quantity
PPV = (ACI-SC)*ACQ
This formula uses 4 Variables
Variables Used
Purchase Price Variance - Purchase Price Variance is the difference between the actual cost paid for materials or goods and the standard or budgeted cost, multiplied by the actual quantity purchased.
Actual Cost Incurred - Actual Cost Incurred refers to the total expenditure or expenses that have been actually accrued by a business for a particular activity, project, or period.
Standard Cost - Standard Cost is the predetermined or estimated cost that a business expects to incur for producing a unit of product or delivering a service, based on standard pricing and efficiency levels.
Actual Quantity - Actual Quantity refers to the real amount or volume of a specific item, material, product, or resource used, consumed, produced, or acquired within a certain timeframe.
STEP 1: Convert Input(s) to Base Unit
Actual Cost Incurred: 254 --> No Conversion Required
Standard Cost: 230 --> No Conversion Required
Actual Quantity: 95 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
PPV = (ACI-SC)*ACQ --> (254-230)*95
Evaluating ... ...
PPV = 2280
STEP 3: Convert Result to Output's Unit
2280 --> No Conversion Required
FINAL ANSWER
2280 <-- Purchase Price Variance
(Calculation completed in 00.004 seconds)

Credits

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Created by Keerthika Bathula
Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad
Keerthika Bathula has created this Calculator and 50+ more calculators!
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Verified by Aashna
IGNOU (IGNOU), India
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25 Cost Accounting Calculators

Material Cost Variance
​ Go Material Cost Variance = (Standard Quality for Actual Output*Standard Price)-(Actual Quantity*Actual Price)
Labour Cost Variance
​ Go Labour Cost Variance = (Standard Hours for Actual Output*Standard Rate)-(Actual Hours*Actual Rate)
Revised Standard Quantity
​ Go Revised Standard Quantity = (Standard Quantity of each Material/Total Standard Quantity)*Total Actual Quantity
Learning Curve
​ Go Learning Curve = (Time Taken to Produce Initial Quantity*Cumulative Number of Batches)^(-Learning Coefficient)
Labour Efficiency Variance
​ Go Labour Efficiency Variance = Standard Rate*(Standard Time-Actual Time)*Variance
Time to Receive
​ Go Time to Receive = Time for Stock Validation+Time to Add Stock to Records+Time to Prep Stock for Storage
Labour Rate Variance
​ Go Labour Rate Variance = Actual Time*(Standard Rate-Actual Rate)*Variance
Cycle Time
​ Go Cycle Time = Process Time+Inspection Time+Move Time+Queue Time
Revised Standard Hours of Labours
​ Go Revised Standard Hours of Labours = (Actual Mix/Standard Mix)*(Standard Hours of Labour)
Material Yield Variance
​ Go Material Yield Variance = (Actual Unit Usage-Standard Unit Usage)*Standard Cost per Unit
Overall Equipment Effectiveness
​ Go Overall Equipment Effectiveness = Good Count*Ideal Cycle Time/Planned Production Time
Avoided Cost
​ Go Avoided Costs = Assumed Repair Cost+Production Losses-Preventative Maintenance Cost
Material Usage Variance
​ Go Material Usage Variance = Standard Price*(Actual Quantity Units-Standard Quantity)
Labour Mix Variance
​ Go Labour Mix Variance = Standard Rate*(Reversed Standard Rate-Actual Time)
Material Price Variance
​ Go Material Price Variance = Actual Quantity*(Standard Price-Actual Price)
Material Quantity
​ Go Material Quantity = Standard Price*(Standard Quantity-Actual Quantity)
Customer Acquisition Cost
​ Go Customer Acquisition Cost = Cost of Sales and Marketing/Number of New Customers Acquired
Total Addressable Market
​ Go Total Addressable Market = Annual Contract Value per Client*Number of Potential Clients
First Pass Yield
​ Go First Pass Yield = Number of Good Products Finished/Number of Production Orders Started
Average Days Delinquent
​ Go Average Days Delinquent = Days Sales Outstanding-Best Possible Days Sales Outstanding
Backorder Rate
​ Go Backorder Rate = (Number of Undeliverable Orders/Total Number of Orders)
Monthly Recurring Revenue
​ Go Monthly Recurring Revenue = Number of Customers*Average Billed Amount
Sell -Through Rate
​ Go Sell Through Rate = Number of Units Sold/Number of Units Received
Takt Time
​ Go Takt Time = Production Available Time/Customer Demand
On-Time Delivery
​ Go On-Time Delivery = On Time Units/Total Units

Purchase Price Variance Formula

Purchase Price Variance = (Actual Cost Incurred-Standard Cost)*Actual Quantity
PPV = (ACI-SC)*ACQ

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.

FAQ

What is 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 and is represented as PPV = (ACI-SC)*ACQ or Purchase Price Variance = (Actual Cost Incurred-Standard Cost)*Actual Quantity. Actual Cost Incurred refers to the total expenditure or expenses that have been actually accrued by a business for a particular activity, project, or period, Standard Cost is the predetermined or estimated cost that a business expects to incur for producing a unit of product or delivering a service, based on standard pricing and efficiency levels & Actual Quantity refers to the real amount or volume of a specific item, material, product, or resource used, consumed, produced, or acquired within a certain timeframe.
How to calculate 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 is calculated using Purchase Price Variance = (Actual Cost Incurred-Standard Cost)*Actual Quantity. To calculate Purchase Price Variance, you need Actual Cost Incurred (ACI), Standard Cost (SC) & Actual Quantity (ACQ). With our tool, you need to enter the respective value for Actual Cost Incurred, Standard Cost & Actual Quantity and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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