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CMA Intermediate · Cost Accounting · Standard Costing and Variance Analysis

Sharma Components budgeted to sell 2,000 units at Rs 50 per unit. It actually sold 2,200 units at Rs 48 per unit. What is the sales price variance (turnover method)?

The sales price variance is Rs 4,400 Adverse. The actual selling price of Rs 48 is Rs 2 below the standard Rs 50, and this shortfall applies to the 2,200 units actually sold, giving 2 x 2,200 = Rs 4,400 adverse.

  1. ARs 4,400 AdverseCorrect
  2. BRs 4,400 Favourable
  3. CRs 5,000 Favourable
  4. DRs 4,000 Adverse

Explanation

Sales price variance = (Actual price - Standard price) x Actual quantity = (48 - 50) x 2,200 = Rs 4,400 Adverse. Option D wrongly uses the budgeted quantity of 2,000 units. Check: value variance = 105,600 - 100,000 = 5,600 F; volume variance = 200 x 50 = 10,000 F; price 4,400 A; 10,000 - 4,400 = 5,600.

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