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Monitoring Price Variances

Purchasing provides you with reports you can use to review the purchase and invoice price variances. You should run the Purchase Price Variance Report weekly to review the accuracy of standard costs and purchase price variance. The Purchase Price Variance Report is also a good indicator of buyer's performance. However, you should make sure to include in your analysis any fluctuation of market prices beyond buyer control or changes in standard costs. At the end of a period, you should run the Purchase Price Variance Report for the entire period. See: Purchase Price Variance Report.

You should run the Invoice Price Variance Report monthly to review the accuracy of standard costs and purchase order prices. The Invoice Price Variance Report is also a good indicator of buyers' performance. However, you should make sure to include in your analysis any pricing fluctuations beyond buyer control.

You can sort the Invoice Price Variance Report by Category or Supplier, and you can restrict your report to invoice price variances for a specific Category, Supplier, or Period Name.

At the end of a period, you should run the Invoice Price Variance Report for this period. Identify the invoice price variance for all purchase orders charged to the Inventory A/P Accrual Account and compare it with the balance of the Invoice Price Variance account in your general ledger. See: Invoice Price Variance Report.

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