A chemical company sets a standard cost for a key component at $5 per unit.

To calculate the Purchase Price Variance (PPV), use the following formula:

PPV=(Actual Price−Standard Price)×Actual Quantity\text{PPV} = (\text{Actual Price} - \text{Standard Price}) \times \text{Actual Quantity}PPV=(Actual Price−Standard Price)×Actual Quantity

Given:

Standard Price = $5.00 per unit

Actual Price = $4.50 per unit

Actual Quantity = 12,000 units

\text{PPV} = ($4.50 - $5.00) \times 12,000 \text{PPV} = (-$0.50) \times 12,000 \text{PPV} = -$6,000.00

The negative sign indicates a favorable variance (cost savings). Hence, the PPV for the month of March is ($6,000.00). Leadership and transformation management documents emphasize the importance of variance analysis in controlling procurement costs and ensuring budget compliance. References highlight that monitoring PPV helps identify cost-saving opportunities and improve financial performance.