Price variance (original) (raw)

Price variance (Vmp) is a term used in cost accounting which denotes the difference between the expected cost of an item (standard cost) and the actual cost at the time of purchase. The price of an item is often affected by the quantity of items ordered, and this is taken into consideration. A price variance means that actual costs may exceed the budgeted cost, which is generally not desirable. This is important when companies are deciding what quantities of an item to purchase.