Can someone please explain exactly what PPV is? One of our customers wants to have a meeting concerning PPV on their parts and I am totally in the dark.

Doug

Can someone please explain exactly what PPV is? One of our customers wants to have a meeting concerning PPV on their parts and I am totally in the dark.

Doug

Hello Doug,

Purchase Price Variance.

See: http://www.technology.ccsu.edu/personnel/information/emiliani/ra_papers/ppv.pdf

Stijloor.

Thank you for the rapid response. Now I won't have to go in blind.

Doug

To expand on the issue...

The Purchase Price is often a component of a managerial accounting system. The Purchase Price for those purposes is a budgeted amount. The PPV, then, can be the subject of analysis to determine why the variance is there. Now, for the caveat.

Be certain that you understand where the budgeted purchase price came from. Beware of, say, a situation where the budgeted purchase price is based on the invoice, but gets entered into the cost accounting software with the shipping costs attached (when the invoice does not include shipping). That is just an example.

Before delving into a question about variances in a cost (managerial) accounting situation, ALWAYS find out where the numbers are coming from, and what assumptions (there's that word again) were made during the construction of the metrics.

Anyone for a fun discussion on the application of overhead?