The Category Management Handbook

Activity 14Purchase-price cost analysis (PPCA)

Figure 2.14 Purchase-price cost analysis

Overview

PPCA is a popular tool initially developed by the accounting community in the 1970s and subsequently tailored by purchasing consultants in the 1980s. It is primarily used to identify the breakdown of costs involved in the production of a product. This in turn helps with further research in relation to pricing (e.g. the amount of profit retained by the supplier).

This technique is also referred to as cost-breakdown analysis or ‘teardown’ analysis, and it is considered that understanding such detail can be helpful when it comes to the implementation ...