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Purchase price variance on material cost without planned delivery cost/surcharges

Mar 22, 2017 at 06:16 PM


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Former Member


We calculate the standard cost as the material cost plus the surcharges (planned delivery cost such as freight, duty, MOH, etc.). This will make the standard cost and any PPV will be calculated as the difference b/w purchase price and Standard cost. The business requirement is to not "distort" the PPV by the Planned delivery cost. As an example: Standard price : $10 ( material $7+ freight $2 + duty $1) . Purchase price is $8, so the PPV is $2 ($10-$8). However, the requirement is to calculate PPV as ($7-8=-$1) so the PPV is -$1 and variance for freight and duty is calculated and posted separately?

Thank you


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