Purchase Price Variance (PPV)
Definition
The difference between what you expected to pay for inventory (standard cost) and what you actually paid.
Want a deeper explanation?
Formula
PPV = (Actual Price − Standard Price) × Quantity PurchasedPPV shows when costs move away from the plan, whether from supplier price changes, freight or tariffs. It is one of the first signs margins are under pressure.
It matters most if you use standard costing. Watch for: unfavorable PPV left sitting in a variance account instead of being reviewed, which hides rising costs from pricing decisions.
Example
Your standard cost is $8.00, but freight rates spiked and the landed cost was $8.60. On 10,000 units, PPV is $6,000 unfavorable.