The Procurement Glossary » Purchase Price Variance (PPV)

Purchase Price Variance (PPV)

Finance & Payments

Also known as: PPV

Definition

The difference between the actual price paid for an item and its standard or expected price.

Explanation

PPV shows whether buying beat or missed the planned cost, feeding both savings tracking and manufacturing cost accounting. Favourable PPV means paying below standard; unfavourable means above. It links procurement performance to the P&L.

Example

Buying steel below the standard cost produces a favourable PPV that boosts margin.

Related terms

• Cost Savings — A reduction in the price or cost of a purchase compared with a baseline, delivered through sourcing or negotiation.
• Benchmarking — Comparing prices, costs or performance against internal history, peers or the market to judge competitiveness.
• Cost of Goods Sold (COGS) — The direct costs of producing the goods a company sells, including direct materials and labour.
• Budget — A financial plan allocating expected spend across categories, departments or projects for a period.

Frequently Asked Questions

What is Purchase Price Variance (PPV)?

The difference between the actual price paid for an item and its standard or expected price. PPV shows whether buying beat or missed the planned cost, feeding both savings tracking and manufacturing cost accounting. Favourable PPV means paying below standard; unfavourable means above. It links procurement performance to the P&L.

Can you give an example of Purchase Price Variance (PPV)?

Buying steel below the standard cost produces a favourable PPV that boosts margin.

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