1. What is Price Variance Percentage?

Price Variance Percentage measures the difference between actual and standard prices as a percentage of the standard price. It's commonly used in cost accounting, procurement, and financial analysis to assess price fluctuations.

2. How Does the Calculator Work?

The calculator uses the price variance percentage formula:

Where:

• \( \text{Actual Price} \) — The real price paid or received
• \( \text{Standard Price} \) — The expected or budgeted price

Explanation: A positive result means the actual price is higher than standard (unfavorable variance), while negative means it's lower (favorable variance).

3. Importance of Price Variance Calculation

Details: Price variance analysis helps businesses identify cost overruns, negotiate better deals, adjust pricing strategies, and improve budgeting accuracy.

4. Using the Calculator

Tips: Enter both actual and standard prices in dollars. Standard price must be greater than zero. Results show percentage difference between the two values.

5. Frequently Asked Questions (FAQ)

Q1: What's a good variance percentage?
A: This varies by industry, but generally variances beyond ±5% warrant investigation. Critical items may have tighter thresholds.

Q2: How is this different from quantity variance?
A: Price variance focuses on unit price differences, while quantity variance measures differences in amounts purchased/used.

Q3: Can variance be positive and favorable?
A: For costs, negative variance is favorable (cost less than expected). For revenues, positive is favorable (earned more than expected).

Q4: When should I calculate price variance?
A: Regularly for procurement activities, after major purchases, and during financial reviews to monitor spending patterns.

Q5: What causes price variances?
A: Market fluctuations, supplier changes, volume discounts, currency changes, or incorrect standard price setting.