Purchasing & suppliers
Purchase Price Variance (PPV)
By the Supply Chain Manager team · Updated October 16, 2026
Purchase price variance (PPV) is the difference between the price actually paid for an item and its standard or expected cost.
A positive variance means you paid more than planned, which erodes margin if selling prices do not move. Tracked per supplier and SKU, PPV shows where price increases are creeping in and which suppliers hold their prices.
A negative variance, paying less than standard, is not automatically good news. It can come from buying larger quantities than needed to earn a discount, which raises carrying cost, or from a cheaper but less reliable supplier. Reviewing variances alongside quantity and supplier performance gives the full picture.
How to calculate purchase price variance
Price Variance % = (Price Paid − Standard Cost) ÷ Standard Cost × 100 Variance Value = (Price Paid − Standard Cost) × Quantity
Purchase price variance example
Illustrative numbers: standard cost $4.00, paid $4.30 on 2,000 units. Price variance is +7.5%, or $600 more than planned on that order.
Why purchase price variance matters for distributors
Distributors run on thin margins. Small, unnoticed price increases across many SKUs can wipe out a year's margin improvement elsewhere.
Common purchase price variance mistakes
- Leaving standard costs out of date, so every variance looks large or small.
- Ignoring freight and duties, which belong in landed cost.
Purchase price variance in Supply Chain Manager
Supply Chain Manager calculates price variance for each purchase order line against the product's baseline unit cost.
Open the live demoExamples on this page use made-up round numbers to show the calculation. They are not benchmarks or results from real businesses.