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In accounting, purchase price variance (PPV) accounts for the potential change in value of materials from when theyre purchased to when theyre recorded. Understanding PPV can help you manage a companys accounting process。

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.

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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