Performance Management · Standard costing

Sales Price and Sales Volume Variances Explained

Updated 11 October 2026 · Fact-checked

The sales price variance compares actual revenue with actual units sold at the standard price. The sales volume variance compares actual and budgeted units, valued at standard profit per unit (absorption costing) or standard contribution per unit (marginal costing). Together they explain the gap between budget and actual profit or contribution from sales.

Understand Sales Price and Sales Volume Variances

A sales variance explains why actual sales results differ from budget. There are two causes. You sold at a different price from the standard, or you sold a different number of units from the budget. Each cause has its own variance.

The sales price variance looks at price only. Take the units you actually sold. Ask what revenue they would have brought at the standard price. Compare that with the actual revenue. Higher actual revenue is favourable. Lower is adverse.

The sales volume variance looks at quantity only. Take the difference between actual units sold and budgeted units. Value that difference at the standard margin per unit. Which margin you use depends on the costing system. Under absorption costing, use standard profit per unit. Under marginal costing, use standard contribution per unit.

Why the difference? Under absorption costing, fixed overheads are absorbed into each unit, so the profit per unit already includes a share of them. Selling more units absorbs more overhead. That is why the volume variance uses profit. Under marginal costing, fixed costs are a period cost and do not change with volume. So the extra sale adds only its contribution.

In an operating statement, the sales volume variance starts from budget profit (or contribution). The sales price variance and the cost variances then lead you to actual profit (or contribution). Sales variances are always measured against the original budget, not a flexed one, unless the question asks for planning and operational analysis.

Key rules to remember

Sales price variance: (Actual price − Standard price) × Actual units sold; Equivalent to Actual revenue − (Actual units × Standard price). Positive result is favourable.
Sales volume variance (absorption costing): (Actual units sold − Budgeted units) × Standard profit per unit; Use standard profit per unit, which is standard price less standard full cost. More units than budget is favourable.
Sales volume variance (marginal costing): (Actual units sold − Budgeted units) × Standard contribution per unit; Use standard contribution per unit, which is standard price less standard variable cost.
Standard profit per unit: Standard selling price − Standard full cost per unit; Full cost includes absorbed fixed overhead at the standard rate.
Standard contribution per unit: Standard selling price − Standard variable cost per unit; Fixed overheads are excluded.

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 stops you using the wrong margin.

1Read the question and find the costing system: absorption or marginal. This decides whether volume uses profit or contribution.
2Write down the standard selling price, the standard cost per unit, and the budgeted and actual units sold. Use units sold, not units produced.
3Work out the standard margin per unit: standard profit (absorption) or standard contribution (marginal).
4Calculate the sales price variance: actual revenue minus actual units at the standard price.
5Calculate the sales volume variance: (actual units − budgeted units) × standard margin per unit.
6Label each answer Favourable (F) or Adverse (A). Higher revenue or higher volume is F.
7If asked, place the variances in an operating statement from budget profit or contribution to actual, and check that the total reconciles.

Quickest way: Revenue and units shortcut

When to use it: Use this in Section A and Section B objective questions, where you have little time and only need the numbers.

Price variance: compute actual revenue minus (actual units × standard price). You do not need the cost data.
Volume variance: subtract budget units from actual units, then multiply by the margin the question points to.
Check the costing wording. If you see "contribution" or "marginal", do not use full cost.
Sense-check the sign. Price up means F. Units up means F. If your signs disagree with that, recheck.

Common mistakes in Sales Price and Sales Volume Variances

Using contribution per unit for the volume variance in an absorption costing question.
Students link volume with contribution from CVP work and forget the costing system matters.
Fix: Underline the costing method in the question. Absorption means standard profit. Marginal means standard contribution.
Valuing the volume variance at the standard selling price instead of the margin.
Price and volume get mixed up because both relate to sales.
Fix: Volume is valued at standard margin only. Revenue effects of price belong in the price variance.
Using budgeted units in the price variance.
Students copy the budget row from the table.
Fix: Price variance always uses actual units sold, because it measures the price effect on what you really sold.
Using units produced rather than units sold.
Questions with stock changes give both figures, and production is more familiar from cost variances.
Fix: Sales variances use sales units only. Ignore production figures here.
Getting the sign wrong.
Students subtract in the wrong order or treat higher sales as adverse.
Fix: Actual minus standard or budget for both formulas. A positive result is favourable.
Flexing the budget before calculating the volume variance.
Students carry over the flexed budget idea from cost variances.
Fix: The sales volume variance is the difference between actual and budgeted sales volume at standard margin. No flexing is needed.

Worked examples

Example 1

A company uses absorption costing. Budget: sell 5,000 units at a standard price of ₹200 per unit. Standard full cost is ₹150 per unit. Actual: 5,400 units sold for ₹10,26,000. Calculate the sales price and sales volume variances.

Show the solution

Standard profit per unit = ₹200 − ₹150 = ₹50.
Revenue at standard price for actual units = 5,400 × ₹200 = ₹10,80,000.
Sales price variance = ₹10,26,000 − ₹10,80,000 = ₹54,000 Adverse. Check: actual price = ₹10,26,000 ÷ 5,400 = ₹190, which is ₹10 below standard, and ₹10 × 5,400 = ₹54,000.
Sales volume variance = (5,400 − 5,000) × ₹50 = 400 × ₹50 = ₹20,000 Favourable.

Answer: Sales price variance ₹54,000 Adverse. Sales volume variance ₹20,000 Favourable.

Example 2

A company uses marginal costing. Budget: sell 2,000 units at ₹500 each. Standard variable cost is ₹320 per unit and standard fixed overhead is ₹100 per unit. Actual sales: 1,850 units at ₹515 each. Calculate both sales variances and the resulting change in contribution from sales compared with budget.

Show the solution

Standard contribution per unit = ₹500 − ₹320 = ₹180. Fixed overhead is ignored.
Sales price variance = (₹515 − ₹500) × 1,850 = ₹15 × 1,850 = ₹27,750 Favourable.
Sales volume variance = (1,850 − 2,000) × ₹180 = −150 × ₹180 = ₹27,000 Adverse.
Net effect on sales-related contribution = ₹27,750 F − ₹27,000 A = ₹750 Favourable. Check: budget contribution on sales = 2,000 × ₹180 = ₹3,60,000. Actual revenue less standard variable cost = (1,850 × ₹515) − (1,850 × ₹320) = ₹9,52,750 − ₹5,92,000 = ₹3,60,750. The difference is ₹750.

Answer: Sales price variance ₹27,750 Favourable. Sales volume variance ₹27,000 Adverse. Net ₹750 Favourable.

Exam tips

Read the costing system before you touch a number. The same data gives different volume variances under absorption and marginal costing.
In objective test questions, answers are all or nothing. Write the F or A label next to your figure before choosing an option.
In Section C, set out an operating statement with budget profit or contribution at the top and each variance on its own line. Show workings so you can earn method marks.
When asked to comment, link the two variances. A price cut may raise volume, so say whether the net effect on profit was good.
If the question gives a standard profit per unit and standard contribution per unit, check which one it wants. Do not pick the first margin you see.

Practice questions from Standard costing

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 shows the effect of selling at a price different from standard. The sales volume variance shows the effect of selling more or fewer units than budgeted, valued at standard margin. One is about price per unit, the other about the number of units.

When do I use contribution instead of profit for the sales volume variance?

Use contribution when the company uses marginal costing, or when the question asks for a contribution-based variance. Use profit when it uses absorption costing. The reason is that fixed overheads are not in the unit margin under marginal costing.

Do sales variances use units sold or units produced?

They use units sold. Production affects cost variances and stock, not sales variances. Check the question when both figures are given.

Is the sales price variance different under marginal and absorption costing?

No. It is the same under both, because it depends only on the actual and standard prices and the actual units sold. Only the sales volume variance changes with the costing system.