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Price Variance Calculator

Enter the actual price, standard price, and actual quantity to find the price variance.

How it is calculated

The tool isolates the effect of paying a different price per unit than planned: price variance = (actual price − standard price) × actual quantity. Use the quantity actually purchased (not the budgeted one), and enter both prices per unit in the same currency. It also shows the per-unit difference, actual price − standard price. The sign gives the status: a positive variance means more was paid than standard and is labelled Unfavorable (paid more), a negative one is Favorable (paid less), and exactly zero shows No variance. The quantity cannot be negative; prices can be any value. The result does not say why the price changed, and it ignores usage variance, which is calculated separately. Amounts are displayed in dollars.

Worked example

The standard cost of a component is 4.00 and the actual price paid is 4.35, for 2,500 units. Per-unit difference = 4.35 − 4.00 = $0.35. Price variance = 0.35 × 2,500 = $875.00. Because it is positive, the status is Unfavorable (paid more): purchasing spent 875 more than the standard price would have cost. At an actual price of 3.80 the result would be −$500.00, Favorable.

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Common mistakes

  • Using the standard (budgeted) quantity instead of the actual quantity bought. Price variance is measured on what was actually purchased.
  • Reading a negative number as bad. Here negative means the price paid was below standard, which is favorable.
  • Mixing price variance with total cost variance. If more units were used than planned, that is a usage variance and does not appear in this result.
  • Entering the total invoice amount as the actual price. Both price fields are per unit; use the invoice total divided by the units.
  • Comparing prices in different currencies or units (per kg versus per tonne), which makes the variance meaningless.

Sources

About this calculator

In standard costing, price (or rate) variance measures how much actual spending differed from budget purely due to a price change, holding quantity constant: Price Variance = (Actual Price − Standard Price) × Actual Quantity. A positive variance (paying more than standard) is unfavorable, while paying less than standard is favorable.

Manufacturing and purchasing teams use price variance, alongside its counterpart quantity (usage) variance, to isolate exactly why actual costs deviated from budget — separating “we paid a different price per unit” from “we used a different amount of material” — which is essential for holding purchasing departments accountable and negotiating with suppliers. Compare what you actually paid per unit with the standard price, multiply by the quantity bought, and you have the price variance and whether it is favorable or unfavorable.

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Comments (1)

  • Editorial team

    In the default case, 12 paid against a standard of 10 on 500 units gives 1,000 unfavorable, 2 per unit. Before calling that a buying failure, check whether the quantity bought differs from the plan: a smaller lot often costs more per unit, and a favorable variance can come from cheaper material that costs you elsewhere. This tool covers price only. What do you set your standard prices against: last quote, average, or budget?

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