---
title: "Purchase price variance"
description: "What is purchase price variance (PPV)? The gap between an item's standard cost and the price actually paid. Learn the formula and see a worked example."
url: https://1flux.ai/glossary/purchase-price-variance
last_updated: 2026-10-10
---

[Accounting](https://1flux.ai/glossary#accounting)

# Purchase price variance

What is purchase price variance, and how is it different from invoice price variance?

Glossary Updated 10 October 2026

Definition

Purchase price variance (PPV) is the difference between the standard cost of an item and the actual price paid for it, recorded when goods are received.

## What is purchase price variance used for?

PPV applies under [standard costing](https://1flux.ai/glossary/standard-cost), where stock is held at its standard. Paying more than standard gives an unfavourable variance; paying less gives a favourable one. Tracking PPV shows buying performance and whether standards need updating. The formula is (actual price − standard price) × quantity received.

An unfavourable variance

Example

- Standard price

  USD 120

- Actual price

  USD 126

- Quantity received

  200 units

PPV: (126 − 120) × 200

USD 1,200

Unfavourable: the buyer paid more than standard.

PPV is often confused with [invoice price variance](https://1flux.ai/glossary/invoice-price-variance), which compares the supplier’s invoice with the purchase order price.

In 1flux

Under standard costing, goods receipt reports post the difference from standard cost to a Purchase price variance account automatically. [See inventory costing and valuation](https://1flux.ai/products/inventory/costing-and-valuation)

Related

## Keep exploring

### [Standard cost](https://1flux.ai/glossary/standard-cost)

A set cost per item, with differences recorded as variances.

### [Invoice price variance](https://1flux.ai/glossary/invoice-price-variance)

The gap between a supplier's invoice price and the PO price.

### [Goods receipt report](https://1flux.ai/glossary/goods-receipt-report)

The document that accepts received goods into stock and the books.

### [Costing and valuation](https://1flux.ai/products/inventory/costing-and-valuation)

Weighted average, FIFO or standard cost per company, with cost layers you can audit.

Last updated 10 October 2026