1. What is Price Variance?

Price Variance is the difference between the actual price paid for an item and its standard or expected price. It helps businesses analyze cost control and purchasing efficiency.

2. How Does the Calculator Work?

The calculator uses the Price Variance formula:

Where:

• Actual Price — The real price paid for an item
• Standard Price — The expected or budgeted price for the item

Explanation: A positive variance means the actual price was higher than expected (unfavorable), while a negative variance means it was lower (favorable).

3. Importance of Price Variance Calculation

Details: Price variance analysis helps businesses identify cost overruns, evaluate purchasing performance, and improve budgeting accuracy.

4. Using the Calculator

Tips: Enter both actual and standard prices in dollars. The calculator will show the difference between them.

5. Frequently Asked Questions (FAQ)

Q1: What does a positive price variance mean?
A: A positive variance indicates the actual price was higher than standard (unfavorable variance).

Q2: What does a negative price variance mean?
A: A negative variance means the actual price was lower than standard (favorable variance).

Q3: How often should price variance be calculated?
A: Typically calculated for each purchase or periodically (monthly/quarterly) for analysis.

Q4: What factors can cause price variance?
A: Market fluctuations, supplier changes, purchase volume discounts, or inaccurate standard pricing.

Q5: How should businesses respond to price variances?
A: Investigate significant variances, adjust purchasing strategies, or update standard costs if needed.