Enter the actual unit cost, standard unit cost, and the actual quantity purchased into the calculator to determine the price variance.
Price Variance Formula
The following formula is used to calculate a price variance of a material.
VPM = (AC – SC) * Q
- Where VPM is the price variance
- AC is the actual unit cost
- SC is the standard cost
- Q is the quantity purchased
Price Variance Definition
A price variance is defined as the total difference in cost of a unit compared to the standard cost.
Price Variance Example
How to calculate price variance.
- First, determine the actual cost.
Calculate the actual cost the material was purchased at. For this example we will use $10.
- Next, determine the standard cost.
This would typically be the average cost. We will assume 5$ for the example.
- Next, determine the quantity purchased.
For this example we will say 10 units were purchased.
- Finally, calculate the price variance.
Using the formula we find the price variance is VMP = (10-5)*10 = $50.00. The variance in price was $50.00 over the entire order.
A price variance is the total difference in price of purchased material from a standard cost. In other words, how much the price varied from the average cost.