Calculate purchase price variance
The calculator uses CAD formatting for readability, but the arithmetic works for any single currency. Do not mix currencies without converting to one consistent basis.
Purchase price variance formula
PPV = (Actual unit cost − Standard unit cost) × Actual quantity purchased
Under this convention, a positive result is unfavourable because actual cost exceeded standard cost. A negative result is favourable. Some accounting systems display signs differently, so label the direction explicitly. Oracle’s manufacturing documentation describes PPV as the difference between purchase-order price and standard cost; see its purchase price variance overview.
PPV percentage
PPV % = (Actual unit cost − Standard unit cost) ÷ Standard unit cost
Percentage makes unlike items easier to scan; dollar variance tells you materiality. Use both.
Worked PPV example
Your standard cost for sunflower oil is $4.50/L. The invoice shows an actual normalized cost of $4.80/L for 60 L.
- Unit-cost variance: $4.80 − $4.50 = $0.30/L.
- PPV: $0.30 × 60 = $18 unfavourable.
- PPV percentage: $0.30 ÷ $4.50 = 6.67%.
If this quantity repeats three times, the simple projected exposure is $54. That projection is a planning scenario—not an accounting entry.
| Actual cost | Quantity | PPV | Direction |
|---|---|---|---|
| $4.80 | 60 | +$18 | Unfavourable |
| $4.35 | 60 | −$9 | Favourable |
| $4.50 | 60 | $0 | No variance |
How to interpret PPV
Investigate the driver
PPV can come from negotiation, commodity movement, rush purchasing, minimum orders, freight allocation, foreign exchange, product substitution, or a stale standard. It does not identify the cause by itself.
Separate purchasing performance from standard maintenance
A consistently favourable variance may mean good buying—or an outdated high standard. A consistently unfavourable variance may reflect market movement the standard has not caught up with. Revisit standards on a defined cadence.
Use a relevant market index carefully
The U.S. Bureau of Labor Statistics explains Producer Price Indexes, and Statistics Canada publishes producer price indexes. Match the series, geography, stage of production, and time period to the claimed driver. An index is context, not proof that a specific SKU should move by the same percentage.
Frequently asked questions
What is a favourable purchase price variance?
Using the calculator’s sign convention, actual unit cost below standard creates a negative, favourable variance. Label direction because accounting systems may reverse the displayed sign.
Should PPV include freight?
Use the cost basis your standard represents. If standard cost includes landed freight, actual cost should include comparable freight. If not, track freight variance separately.
Is PPV the same as price change percentage?
No. Price change percentage measures unit-cost movement. PPV multiplies the unit-cost difference by actual quantity, producing a dollar variance for the purchase.