1. What is Price Variance Percentage?

Price Variance Percentage is a financial metric that measures the difference between actual and budgeted prices as a percentage of the budgeted price. It helps businesses understand cost deviations and manage budgets effectively.

2. How Does the Calculator Work?

The calculator uses the price variance percentage formula:

Where:

• \( \text{Actual Price} \) — The real price paid for an item or service
• \( \text{Budget Price} \) — The planned or expected price

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

3. Importance of Price Variance Calculation

Details: Calculating price variance helps businesses identify cost overruns, negotiate better prices, improve budgeting accuracy, and make informed purchasing decisions.

4. Using the Calculator

Tips: Enter both actual and budget prices in dollars. The budget price must be greater than zero for the calculation to work.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good variance percentage?
A: This varies by industry, but generally ±5% is acceptable, while variances beyond ±10% may require investigation.

Q2: How often should price variance be calculated?
A: Typically calculated monthly for regular purchases, or per transaction for major purchases.

Q3: What causes price variances?
A: Market fluctuations, supplier changes, unexpected demand, budgeting errors, or changes in product specifications.

Q4: Can variance be calculated for services?
A: Yes, the same formula applies to service costs as well as product costs.

Q5: How should negative variance be interpreted?
A: Negative variance means actual cost was less than budgeted, which is generally favorable but could indicate quality compromises.