CMA Final · Strategic Cost Management · Variance Analyses
Meera Textiles budgeted sales of 5,000 units at Rs 200 with a standard cost of Rs 140 per unit. Actual sales were 5,400 units at Rs 195. Using the standard costing profit approach, what is the sales margin price variance?
The sales margin price variance is Rs 27,000 Adverse. The actual selling price of Rs 195 is Rs 5 below the standard Rs 200, and this reduction applies to all 5,400 units actually sold, so 5 x 5,400 equals Rs 27,000 adverse.
- ARs 27,000 AdverseCorrect
- BRs 27,000 Favourable
- CRs 24,000 Favourable
- DRs 30,000 Adverse
Explanation
Sales margin price variance = (actual price - standard price) x actual units = (195 - 200) x 5,400 = Rs 27,000 Adverse. The Rs 24,000 Favourable option is the sales margin volume variance (400 x 60), a different variance. Using budgeted units gives Rs 25,000, which is the wrong base.
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