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Variance analysis can help companies manage projects, productions or operational expenses by monitoring planned versus actual costs. Creating an effective analysis can help businesses maintain and improve operations.

In this article, we answer What is PPV?, outline what causes variances in the purchase price of products and services, discuss why organisations use PPV, explain how to calculate it and review some examples.

Heres the formula to calculate purchase price variance: Purchase price variance = (Actual quantity x Standard price) − Actual quantity x Actual price Related: What Is PPV in Accounting? (How to Record It in Your Books)

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