Accounting Purchase Price Analysis

An accounting purchase price analysis is the process of calculating the variance between the price you budget for business purchases and the amount you actually spend. If your analysis results in a positive figure, your actual costs for the purchases have increased. If your results show a negative figure, your actual costs have decreased. Variances can occur for a number of reasons, including external supplier issues, internal rush orders resulting in additional charges, and volume discounts.

  1. 1.

    Determine the amount you planned to purchase an item for. This is also called the standard price of the item, or the amount you budget for the item.

  2. 2.

    Calculate the actual price you paid.

  3. 3.

    Subtract the standard price from the actual price.

  4. 4.

    Multiply the difference between the standard and actual price by the number of items purchased. The result is your purchase price variance.