AX purchase price variance (STD costing). Do we need to setup trade agreement?

STD costing model.  Setup cost price (costing version) for an item (PCX01).  for e.g. cost price is defined as $10. 

In the item purchase fast tab, price is not defined. 

Received an item at $12.  

how does PPV is calculated.  is it based off a cost price. ie. PPV is $2. 

suppose I entered a purchase price (item fast tab) as $10.5,  would the PPV be $1.50?