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Quantify the gap between the price you planned and the price you paid.
Purchase price variance is where procurement performance becomes a number the finance team can see. It isolates one question from all the noise in a spend report: for the volume we actually bought, did we pay what we said we would? Consistently unfavourable PPV on a contracted item means the contract is not being honoured — by the supplier, or by your own buyers.
Your numbers
The contracted or budgeted unit price.
Total price variance
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Positive is unfavourable: this much above plan on this purchase.
Updates as you type · nothing leaves your browser
The formula
PPV = (Actual price − Standard price) × Quantity
A positive result is unfavourable — you paid above plan.
What it means
Purchase Order — full definition
Read in the glossarySet the standard price from the contract or the budget rate, not from last month's invoice.
Use the actual price net of discounts and rebates, so the variance reflects real cash.
Multiply by the quantity actually bought — a small per-unit gap on a large volume is where the money is.
PPV rewards buying cheap, which is not the same as buying well. A favourable variance won by dropping to a lower-quality supplier reappears later as scrap, rework or returns.
Splitting variance from a stale standard turns the metric into noise. Refresh standards at least annually, and after any material market move.
Worked example
Standard 20, actual 21.50, quantity 500. Per-unit variance is 1.50 — only 7.5% — but total variance is 750 unfavourable on a single order. Repeat that monthly and it is 9,000 a year leaking against a contract everyone believes is being enforced.
No. It can come from a genuine negotiation, from buying a cheaper substitute, or from over-ordering to hit a price break you did not need. Read it alongside quality and inventory metrics.
At receipt, against the purchase order — that is when the price is committed. Recognising it at invoice mixes price variance with invoicing errors.
Closely. Off-contract buying is one of the largest sources of unfavourable PPV, because it bypasses the negotiated price entirely.
This calculator works on one set of numbers. AWRA OpsHub keeps purchase price variance calculator results current across every item, supplier and location — automatically.
Work out the true per-unit cost once freight, duties and fees are in.
Turn delivery, quality and price data into one comparable supplier score.
Decide whether taking 2/10 net 30 beats holding on to the cash.