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ACCA Applied Knowledge · Management Accounting · Standard costing system

Budgeted sales were 1,000 units at a standard selling price of $50 and standard cost of $35 per unit (absorption costing). Actual sales were 1,100 units at $48 each. Standard cost per unit was achieved. What are the sales price variance and sales volume profit variance?

The sales price variance is $2,200 adverse (1,100 units sold $2 below standard) and the sales volume profit variance is $1,500 favourable (100 extra units at the standard profit of $15 each).

  1. APrice $2,200 adverse; volume profit $1,500 favourableCorrect
  2. BPrice $2,200 adverse; volume profit $3,300 favourable
  3. CPrice $2,000 adverse; volume profit $1,500 favourable
  4. DPrice $2,200 favourable; volume profit $1,500 adverse

Explanation

Price variance = 1,100 x ($48 - $50) = $2,200 adverse. Volume profit variance = (1,100 - 1,000) x ($50 - $35) = 100 x $15 = $1,500 favourable. Using $33 per unit contribution-like figures or actual margin would give $3,300 wrongly, and using budget units for price gives $2,000.

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