PurchaseKPI
Purchasing performance

PPV reveals the impact of purchase-price variance

Purchase Price Variance makes price performance visible and helps purchasing and finance separate price effects from volume effects.

Try the calculatorVisit PurchaseKPI

What is PPV?

PPV means Purchase Price Variance. It compares the actual purchase price with an approved baseline such as a standard, budget, or contracted price, multiplied by the actual purchased quantity.

PPV = (actual price − standard price) × actual quantity

Favourable and unfavourable variance

Using the formula in this guide, a negative PPV is favourable because actual price is below standard. A positive PPV is unfavourable. Always confirm the sign convention used by your organisation before comparing systems.

Example

Standard price is 100, actual price is 96, and quantity is 5,000 units. PPV = (96 − 100) × 5,000 = −20,000. The result is a favourable variance of 20,000, or −4 percent.

Using PPV correctly

Use the same currency, price basis, unit of measure, and cost scope for both prices. Then analyse drivers such as negotiation, indices, commodities, currency, freight, order size, and supplier changes. PPV shows price performance but not total business value on its own.

Calculate your own scenario

Use the free PurchaseKPI calculator and get the result immediately.

PPV calculator