CMA Final · Strategic Cost Management · Variance Analyses
Tara Retail budgeted sales of 2,000 units at Rs 50 with standard cost Rs 35 per unit. Actual sales were 2,200 units at Rs 48 per unit. What is the sales price variance?
The sales price variance is Rs 4,400 Adverse. Actual selling price of Rs 48 was Rs 2 below the standard Rs 50, and this shortfall applies to the 2,200 units actually sold, so profit is reduced.
- ARs 4,400 AdverseCorrect
- BRs 4,000 Adverse
- CRs 3,000 Favourable
- DRs 4,400 Favourable
Explanation
Sales price variance = (actual price - standard price) x actual quantity = (48 - 50) x 2,200 = Rs 4,400 Adverse. Using budgeted units (2,000) gives Rs 4,000, the wrong base; the favourable option has the wrong sign.
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