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Purchase price variance

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edited Aug 6, 2022 12:30AM in Costing 2 comments

Summary:

Dear Experts,

In July there seems to be something large in purchase price variance. There is normally a positive value of around £40k. This is because of the freight overhead recovery. As the standard cost includes 5% for freight, as we book the items in the difference between purchase price and standard cost goes to PPV. This then offsets the freight costs. However in July the positive amount is only £7k. We had purchases of around £1m. So at 5% we should have a credit of around £50k. But as it is £7k that suggest there is £43k of offsetting real purchase

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