ACCA Applied Knowledge · Management Accounting · Budgetary control and reporting
Budgeted sales were 10,000 units at $20 each. Actual sales were 11,000 units at $19 each. Budgeted variable cost is $12 per unit; fixed costs are $40,000. What is the sales revenue variance and the sales price variance?
Revenue is $9,000 favourable, since actual revenue of $209,000 exceeds budget of $200,000. The price variance is $11,000 adverse, because each of the 11,000 units sold went for $1 less than budget. Higher volume more than offset the lower price.
- ARevenue $9,000 favourable; price $11,000 adverseCorrect
- BRevenue $9,000 favourable; price $11,000 favourable
- CRevenue $11,000 favourable; price $9,000 adverse
- DRevenue $9,000 adverse; price $11,000 adverse
Explanation
Budget revenue 200,000; actual revenue 11,000 x 19 = 209,000, so revenue variance is 9,000 favourable. Price variance = (19 - 20) x 11,000 = 11,000 adverse. The volume effect (1,000 x $20 = 20,000 favourable) makes up the difference. Option 3 mixes the amounts up.
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