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Purchase price variance calculator
Purchase price variance (PPV) is what you paid for a part minus its standard cost, times the quantity you bought: (actual price - standard price) x actual quantity. Buying 8,000 widgets at $5.50 against a $5.00 standard is $4,000 unfavorable. Work out PPV for one item or a pasted list of PO lines, then check a supplier invoice against the PO price and the quantity received. Morsa runs that invoice check on every invoice for you and drafts the dispute when a price drifts.
Updated October 21, 2026
The PPV formula
| You want | Formula |
|---|---|
| Purchase price variance | (Actual price - standard price) x actual quantity |
| Variance per unit | Actual price - standard price |
| PPV % | (Actual price - standard price) / standard price |
| Standard spend | Standard price x actual quantity |
| Invoice price variance | (Invoice price - PO price) x invoice quantity |
| Usage (quantity) variance | (Actual quantity used - standard quantity allowed) x standard price |
A positive PPV is unfavorable (you paid more than standard); a negative PPV is favorable.
AccountingTools’ example: Hodgson Industrial Design set a $5.00 standard for a widget assuming 10,000 units a year, then bought only 8,000 at $5.50 because it missed the volume discount. PPV = ($5.50 - $5.00) x 8,000 = $4,000 unfavorable, 10% over standard.
PPV across a whole order
Work each line, then add the dollars. Netting favorable lines against unfavorable ones gives the total, but keep both sides visible: a buyer who saved on one part and overpaid on another has two conversations to have. Ramp’s three-line example:
| Line | Standard | Actual | Quantity | PPV |
|---|---|---|---|---|
| Component A | $5.00 | $5.25 | 200 | $50.00 unfavorable |
| Component B | $8.00 | $7.75 | 150 | -$37.50 favorable |
| Component C | $12.00 | $12.10 | 100 | $10.00 unfavorable |
| Total | $22.50 unfavorable |
Paste lines like these into Many lines in the calculator to get the same totals and a CSV.
In Excel, with standard cost in B, actual price in C and quantity in D: =(C2-B2)*D2 for PPV, and =(C2-B2)/B2 for PPV %.
Favorable or unfavorable
Unfavorable PPV means you paid more than the standard and margins shrink when those parts are sold. Favorable PPV means you paid less. Favorable is not always good news: a cheaper lot can mean lower quality, or a big buy that ties up cash in stock. Some writers flip the sign and use standard - actual; check which convention your ERP and your controller use before you compare reports.
Purchase price variance vs usage variance
| Price variance | Usage (quantity) variance | |
|---|---|---|
| Question | Did we pay the right price? | Did we use the right amount? |
| Formula | (Actual price - standard price) x actual quantity | (Actual quantity used - standard quantity allowed) x standard price |
| Who usually owns it | Purchasing | Production |
| When it is measured | When the material is bought (PPV) or used (material price variance) | When the material is used |
Price variance plus usage variance is the total direct materials variance. The calculator adds the usage variance under the PPV result.
Purchase price variance is measured on what you buy; material price variance uses the same formula on what production uses. When you buy exactly what you use, they are the same number.
What causes purchase price variance
Supplier price changes that never reached the standard cost or the PO.
Commodity swings and shortages: steel, resin, copper and freight move faster than an annual cost roll.
Volume below the standard’s assumption, so the price break is missed (the Hodgson example).
Rush orders: expedite fees and spot buys from a second source.
A new supplier whose pricing is not yet in the standard.
Billing errors: an invoice at the old price, or for more than was received.
How PPV is recorded
Under standard costing, inventory goes on the books at standard and the difference goes to a PPV account. Ramp’s example: $10,000 of material received at standard, invoiced at $10,500.
| Step | Debit | Credit |
|---|---|---|
| Receipt | Inventory $10,000 | Goods received not invoiced $10,000 |
| Invoice | Goods received not invoiced $10,000 and PPV $500 | Accounts payable $10,500 |
Under actual costing the item is booked at the price paid and there is no separate PPV entry.
Check the invoice before you pay it
A lot of PPV is not a market move; it is a supplier billing the wrong price. Before an invoice is paid, compare its price with the PO and its quantity with what receiving counted. That is the price and quantity half of a three-way match. The Invoice price check tab does it, using this example:
| Price | Quantity | Total | |
|---|---|---|---|
| PO | $0.52/lb | ||
| Receipt | 12,000 lb | ||
| Invoice | $0.56/lb | 12,000 lb | $6,720.00 |
| Should be | $0.52/lb | 12,000 lb | $6,240.00 |
| Overcharge | $0.04/lb | $480.00 |
The supplier billed the price from before its September 1 change. The note to send asks for a corrected invoice for $6,240.00 or a credit memo for $480.00.
The tool splits any overcharge into a price part, (invoice price - PO price) x invoice quantity, and a quantity part, (invoice quantity - received quantity) x PO price. Add your price tolerance if your AP policy passes small differences, and the dates of a price change to see whether the old price was billed after it took effect. The dispute note fills in from your numbers, ready to copy.
The modern way: Morsa checks every invoice against the PO and the receipt
The old way is an AP clerk keying invoices, eyeballing the PO in the ERP, and a PPV spreadsheet at month end that finds the old-price invoices after they are paid. Then a phone call to get the credit back. Morsa does the checking. A phone photo of the packing slip becomes the receipt in your ERP; the supplier’s invoice is matched to the PO and the receipt as soon as it lands; an invoice at the old price is caught before it is paid, and a dispute like the one above goes out from accounts payable’s own mailbox once they approve it. Every price change also lands on the supplier’s scorecard, so purchasing sees which suppliers drift. People approve; Morsa does the matching and the chasing.
How to reduce unfavorable PPV
Update standards when prices change, not once a year, so PPV shows real surprises.
Put the agreed price on every PO and check every invoice against it before payment.
Review PPV by supplier and by part each month; a few parts usually carry most of it.
Plan buys around price breaks and avoid rush orders with better reorder points.
Ask for price changes in writing with an effective date, and update the PO the same day.
Frequently asked questions
What is purchase price variance?
The difference between the actual price paid for a purchased item and its standard cost, multiplied by the quantity bought. It shows how far purchasing costs moved from plan.
Is a positive PPV good or bad?
Bad, under the usual (actual - standard) convention: a positive PPV is unfavorable because you paid more than standard. A negative PPV is favorable.
How do you calculate PPV as a percentage?
Divide the price difference by the standard price: (actual - standard) / standard. For a whole order, divide total PPV by total standard spend.
What is the difference between purchase price variance and invoice price variance?
PPV compares the price paid with the standard cost. Invoice price variance compares the invoice price with the PO price, which catches billing errors before payment.
What is the difference between price variance and usage variance?
Price variance measures paying more or less per unit than standard. Usage variance measures using more or less material than standard for the output made, valued at the standard price.
Does PPV apply under actual costing?
Not as a separate entry. Under actual costing, inventory is booked at the price paid. Many companies still track PPV against a budget or last price to see supplier price drift.
How often should PPV be reviewed?
Monthly at least, by supplier and part. Invoice prices should be checked against the PO on every invoice, before it is paid.
Related tools
WHERE MORSA FITS
Every invoice checked before it is paid.
Morsa matches each supplier invoice to the PO and the receipt, catches the old price, and sends the dispute from your accounts payable mailbox once you approve it. It works in email, Teams, WhatsApp or whatever you already run on, on top of your ERP.
