Purchase Price Variance
Also called: PPV, price variance
What is Purchase Price Variance?
Purchase price variance is the difference between the standard or expected price of an item and the price actually paid, multiplied by the quantity bought. It quantifies supplier price drift.
Why Purchase Price Variance matters
Supplier prices move quietly, item by item, and recipes and retail prices rarely move with them. PPV is how a kitchen or shop notices a cost rise before the month-end margin does.
Purchase Price Variance formula
PPV = (Actual price − Standard price) × Quantity purchased
A positive result is adverse: you paid more than expected.
How Purchase Price Variance works in practice
Compare each purchase against the expected rate, and review the largest variances by value weekly. Persistent adverse variance on one line means renegotiating, resourcing or repricing.
Worked example
Buying 200 kg of oil at ₹132 against a standard ₹125 is a ₹1,400 adverse variance for the month.
Frequently asked questions
Use a recent representative purchase rate and revise it periodically, rather than an aspirational number.