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ACCA Applied Knowledge · Management Accounting · Reconciliation of budgeted and actual profit

Which statement about the sales price and sales volume variances is correct?

The sales price variance is based on actual units sold and compares actual with standard selling price. The volume variance instead uses the difference between actual and budgeted quantity valued at standard margin, and it is favourable only when actual sales exceed the budget.

  1. AThe sales volume variance is calculated using the actual selling price
  2. BThe sales price variance compares actual sales with budgeted sales quantity
  3. CThe sales price variance is based on actual units sold, comparing actual and standard selling priceCorrect
  4. DA favourable sales volume variance arises when actual sales are below budget

Explanation

The sales price variance is (actual price - standard price) x actual quantity sold. The volume variance uses standard margin, not actual price. A favourable volume variance arises when actual sales exceed budget, not when they fall below it.

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