ACCA Applied Knowledge · Management Accounting · Reconciliation of budgeted and actual profit
Zeta Ltd budgeted to sell 2,000 units at a standard selling price of $50 per unit. Actual sales were 2,000 units at $52 per unit. What is the sales price variance?
The sales price variance is $4,000 favourable. Actual units sold of 2,000 were sold at $2 above the standard price of $50, and $2 multiplied by 2,000 units gives $4,000. A higher price than standard increases profit, so it is favourable.
- A$4,000 adverse
- B$4,000 favourableCorrect
- C$2,000 favourable
- D$104,000 favourable
Explanation
Sales price variance = (actual price - standard price) x actual units = ($52 - $50) x 2,000 = $4,000. The price achieved was higher than standard, so the variance is favourable. $2,000 results from using only one unit's difference and ignores the 2,000 units sold.
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