ACCA Applied Knowledge · Management Accounting · Variance calculations and analysis
Kestrel Ltd budgeted to sell 2,000 units at a standard selling price of $50 per unit. Actual sales were 2,000 units at $47 per unit. What is the sales price variance?
The sales price variance is $6,000 adverse. Actual units sold of 2,000 were each sold $3 below the standard price of $50, so revenue was $6,000 lower than expected from the price difference alone.
- A$6,000 adverseCorrect
- B$6,000 favourable
- C$3,000 adverse
- D$94,000 adverse
Explanation
Sales price variance = (actual price - standard price) x actual units = (47 - 50) x 2,000 = $6,000. The price was lower than standard, so the variance is adverse. $3,000 would arise only from using the wrong number of units.
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