Management Accounting · Variance calculations and analysis

Sales Price and Sales Volume Variances: Formulas and Differences

Updated 11 October 2026 · Fact-checked

The sales price variance compares actual revenue with actual units sold at the standard price: (actual price − standard price) × actual units. The sales volume variance compares actual units with budgeted units, multiplied by standard profit per unit (absorption costing) or standard contribution per unit (marginal costing). Favourable means more profit.

Understand Sales Price and Sales Volume Variances

A budget sets how many units you plan to sell and at what price. Real results differ on both counts. Sales variances split the difference in profit into two causes: you sold at a different price, or you sold a different number of units.

The sales price variance looks only at price. You take the actual units sold and ask what price you got compared with the standard price. A higher price than standard is favourable. A lower price is adverse.

The sales volume variance looks only at quantity. You take the difference between actual and budgeted units and value it at the standard profit per unit. Selling more than budget is favourable. Selling less is adverse. It is valued at profit, not revenue, because extra units also bring extra costs.

Which profit per unit you use depends on the costing system. Under absorption costing, use standard profit per unit (standard price − standard full cost). Under marginal costing, use standard contribution per unit (standard price − standard variable cost). Read the question to see which one applies. If it gives only a standard profit or contribution figure, use that.

The two variances add up to the total sales variance: the difference between actual sales and budgeted sales, measured in profit terms. They sit at the top of an operating statement, and the cost variances follow.

Key formulas to remember

Sales price variance: (Actual price − Standard price) × Actual units sold; Positive result is favourable. Alternative: Actual revenue − (Actual units × Standard price).
Sales volume variance (units): (Actual units sold − Budgeted units) × Standard profit per unit; Use standard profit under absorption costing. Positive result is favourable.
Sales volume variance (marginal costing): (Actual units sold − Budgeted units) × Standard contribution per unit; Use when the question uses marginal costing or gives contribution per unit.
Total sales margin variance: Sales price variance + Sales volume variance; Equals actual profit on sales less budgeted profit, using standard costs.
Direction rule: Higher price or higher volume = Favourable (F); lower = Adverse (A); This applies to sales variances only. Cost variances work the other way round.

How to solve Sales Price and Sales Volume Variances questions

Use this order for any sales variance question. It keeps price and volume separate and avoids mixing profit with revenue.

1Read the question and note whether it uses absorption or marginal costing.
2List the budget: units and standard selling price. Find the standard profit or contribution per unit (price − standard cost).
3List the actuals: units sold and actual selling price (or actual revenue ÷ actual units).
4Calculate the price variance: (actual price − standard price) × actual units.
5Calculate the volume variance: (actual units − budgeted units) × standard profit or contribution per unit.
6Label each answer F or A. Higher price or volume is F.
7Check: price variance + volume variance should equal actual sales profit at actual price less budgeted profit.
8Write the answer in the format asked, such as a number with F or A.

Quickest way: Price on actual units, volume on the unit gap

When to use it: Use in Section A number-entry or multiple-choice questions where the data is simple and time is short.

Price: work out the price gap per unit, then multiply by actual units. Sign gives F or A.
Volume: work out the unit gap, then multiply by standard profit (or contribution) per unit. Sign gives F or A.
If the question gives total revenue, price variance = actual revenue − actual units × standard price.
Scan the options. Wrong answers usually use revenue instead of profit for volume, or budgeted units for price.

Common mistakes in Sales Price and Sales Volume Variances

Valuing the sales volume variance at the standard selling price instead of standard profit or contribution.
Students think volume is about revenue, so they use price.
Fix: Volume variance always uses standard profit per unit (absorption) or standard contribution per unit (marginal).
Using budgeted units in the sales price variance.
It feels natural to start from the budget.
Fix: Price variance uses actual units sold. Only the volume variance uses budgeted units.
Using standard profit when the question uses marginal costing.
Students apply one formula without checking the costing method.
Fix: Check the wording. If the question mentions contribution or marginal costing, use contribution per unit.
Getting the sign wrong and writing the cost-variance direction.
Cost variances are favourable when actual is lower, and this carries over.
Fix: For sales, more is better: higher price or higher volume is favourable.
Calculating profit per unit with actual costs.
Students mix actual data with the standard cost card.
Fix: Sales variances use standard cost only. Actual cost differences appear in cost variances.

Worked examples

Example 1

A company budgeted to sell 5,000 units at a standard price of $20 per unit. The standard cost is $14 per unit and it uses absorption costing. Actual sales were 5,400 units at $19.50 per unit. Calculate the sales price and sales volume variances.

Show the solution

Standard profit per unit = $20 − $14 = $6.
Price variance = ($19.50 − $20.00) × 5,400 = −$0.50 × 5,400 = −$2,700, so $2,700 adverse.
Volume variance = (5,400 − 5,000) × $6 = 400 × $6 = $2,400 favourable.
Check: budgeted profit = 5,000 × $6 = $30,000. Actual profit at standard cost = 5,400 × ($19.50 − $14) = 5,400 × $5.50 = $29,700. Difference = −$300. Price + volume = −$2,700 + $2,400 = −$300. Correct.

Answer: Sales price variance $2,700 adverse; sales volume variance $2,400 favourable.

Example 2

A business uses marginal costing. Budgeted sales were 8,000 units at $15 each with a standard variable cost of $9 per unit. Actual revenue was $114,000 from 7,500 units. Calculate the sales price variance and the sales volume contribution variance.

Show the solution

Standard contribution per unit = $15 − $9 = $6.
Revenue expected for actual units at standard price = 7,500 × $15 = $112,500.
Price variance = $114,000 − $112,500 = $1,500 favourable. (Actual price = $114,000 ÷ 7,500 = $15.20, which is $0.20 above standard.)
Volume variance = (7,500 − 8,000) × $6 = −500 × $6 = −$3,000, so $3,000 adverse.
Check: budgeted contribution = 8,000 × $6 = $48,000. Actual sales less standard variable cost = $114,000 − 7,500 × $9 = $114,000 − $67,500 = $46,500. Difference = −$1,500. Price + volume = $1,500 − $3,000 = −$1,500. Correct.

Answer: Sales price variance $1,500 favourable; sales volume contribution variance $3,000 adverse.

Exam tips

Circle the costing method in the question. It decides whether you use profit or contribution for volume.
In multiple-response questions, check each statement against the direction rule: higher price or volume means favourable.
For number entry, give the figure asked for and note F or A only if the box allows it. Follow the format shown.
If actual revenue is given instead of price, divide by actual units to find the actual price, or subtract actual units × standard price from revenue.
In Section B operating statements, sales variances adjust budgeted profit to actual profit. Keep the signs consistent.

Practice questions from Variance calculations and analysis

Sales Price and Sales Volume Variances in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Sales Price and Sales Volume Variances: frequently asked questions

What is the difference between sales price and sales volume variance?

The sales price variance measures the profit effect of selling at a price different from standard, on the units actually sold. The sales volume variance measures the profit effect of selling more or fewer units than budgeted, valued at standard profit or contribution per unit.

Why is the sales volume variance based on profit and not revenue?

Selling extra units adds revenue but also adds cost. Using standard profit or contribution per unit shows the net effect on profit. Using revenue would overstate the benefit.

Do I use profit or contribution for the sales volume variance?

Use standard profit per unit under absorption costing and standard contribution per unit under marginal costing. The question wording or the data given will tell you which one applies.

Can a sales price variance be favourable while the volume variance is adverse?

Yes. A company may raise prices and sell fewer units. The two variances are calculated separately, so they can point in opposite directions. Together they show the overall effect on profit.