The Price Variance Calculator is a financial tool used to determine the difference between the actual cost and the standard cost per unit of a product or service multiplied by the actual quantity produced or purchased. It helps in understanding the variance between planned and actual expenditures.
Formula of Price Variance Calculator
The formula for calculating Price Variance is straightforward:
Price Variance = (Actual Price – Standard Price) * Actual Quantity
- Price Variance: The difference between the actual and standard costs.
- Actual Price: The real cost per unit of the product or service.
- Standard Price: The budgeted or standard cost per unit.
- Actual Quantity: The real quantity of units produced or purchased.
Table of General Terms
|Planned or expected cost for a particular activity or service.
|The real cost incurred for a specific activity or service.
|Process of analyzing differences between planned and actual outcomes.
|Variance resulting from differences in actual and planned quantities.
|Predetermined cost usually based on estimates or historical data.
|The difference between the actual cost and the standard cost.
Example of Price Variance Calculator
Suppose a company planned a standard cost of $10 per unit for producing 100 units. However, the actual cost turned out to be $12 per unit, and the company produced 120 units. Using the Price Variance formula:
Price Variance = ($12 – $10) * 120 = $240
This indicates that the company overspent by $240 more than the planned cost due to higher per-unit costs and increased production.
Most Common FAQs
Price Variance is used to evaluate differences between actual and expected costs in production or purchasing.
It helps businesses assess cost overruns or savings compared to planned budgets, aiding in financial decision-making.
Yes, a negative Price Variance implies lower actual costs than the standard, signaling cost savings.