Purchase Price Variance (PPV)

Purchase Price Variance (PPV) measures the difference between the actual price paid for goods or services and a standard or budgeted price. This financial metric helps organizations track procurement performance and understand the impact of price fluctuations on overall costs.

PPV calculation considers:

• Standard/budgeted price per unit
• Actual price paid per unit
• Quantity purchased
• Currency exchange impacts (for international purchases)
• Price adjustments and discounts

Procurement analytics tools track PPV automatically by comparing purchase order prices against standard costs or contract prices, highlighting both favorable and unfavorable variances that require investigation or that demonstrate successful negotiation outcomes.