Variances
Four different types of variances are possible:
The quantity specified in the invoice is different from the quantity delivered and the quantity invoiced so far.
Example:
100 pieces ordered at $10 per piece50 pieces delivered
0 pieces already invoiced
Invoice arrives for $800 for 80 pieces
The price specified in the invoice is different from the price specified in the purchase order.
Example:
100 pieces ordered at $1.30 per piece100 pieces delivered
0 pieces already invoiced
Invoice arrives for $124 for 100 pieces
Here we have a variance in both quantity and price.
Example:
100 pieces ordered at $10 per piece60 pieces delivered
0 pieces already invoiced
Invoice arrives for $1100 for 100 pieces
If the unit in which a material is priced is different from the unit in which a material is ordered, the quantity of a material ordered is referred to as the order price quantity (for example, the purchase order is issued for pieces, but the price is in $ per kg). If you have a purchase order with an order price quantity, there must be a conversion factor between the price unit and the quantity unit. If the conversion factor in the invoice is different from the conversion factor at goods receipt, there is a variance in order price quantity. If the invoice is received before the goods, the conversion factor in the invoice is compared with that of the purchase order.
Example:
100 pieces (= 250 kg) ordered at $20 per kg100 pieces delivered (= 240 kg)
0 pieces already invoiced
Invoice arrives for $5200 for 100 pieces (= 260 kg)
Thus, the conversion factor of the order price quantity and the order quantity is
in the purchase order: |
2.5 kg per piece |
at goods receipt: |
2.4 kg per piece |
in the invoice: |
2.6 kg per piece |