Price Variance - Explained
What is Price Variance?
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Table of ContentsWhat is Price Variance?How is Price Variance Used?Academic Research for Capacity Usage Variance
What is Price Variance?
Price Variance is the difference in the actual amount for which an item is purchased and the standard price of the item, the multiplied by the total quantity purchased. The Formula for calculating price variance is:
Price variance = (actual price - standard price) x actual quantity
A positive price variance shows that prices for purchasing items exceeded the expectations or budget for those items. A negative price variance indicates that goods cost less than expected.
Management will keep an eye on price variance when creating budgets.
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- Job Costing vs Process Costing
- Assign Overhead Costs to Products
- Plantwide Cost Allocation
- Department Cost Allocation
- Activity-Based Costing
- Weighted-Average Cost of Products
- Production Cost Report
- Fixed, Variable, and Mixed Cost Estimations
- Contribution Margin Income Statement
- Cost-Volume-Profit Analysis
- Margin of Safety
- Contribution Margin per Unit of Constraint
- Absorption Costing vs Variable Costing
- Differential Analysis and Decisions
- Cost Decisions for Joint Products
- Capital Budgeting
- Life Cycle Costing
- The Master Budget
- Activity-Based Budgeting
- Standard Costs
- Imputed Value
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- Absorption Pricing
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- Absorption Variance
- Responsibility Centers
- Comparing Segmented Income
- Using ROI to Evaluate Performance
- Using Residual Income to Evaluate Performance
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