Sales Price Variance Formula

Sales Price Variance Formula

Sales price variance formula has been given below. Sale price variance formula has been explained with an example

Actual Quantity Sold x (Actual price – Standard Price)

Difference between the actual and standard price of the quantity sold is technically known as sales price variance. Sales price variance reflects, when actual sales price differ from the standard price.

Sales Price Variance Formula Example

Quantity of material Sold = 1500

Standard Price of material = 15

Actual Price = 10

Solution

Actual Quantity Sold x (Actual Price – Standard Price)

= 1500 x (10-15)

= 1500 x -5

= -7500(Sales price variance)

 Significance of Sales price Variance

Sales price variance shows the changes in revenue due to the variation of actual sales price. These sales price variation may be investigated (especially reduce in price).

Favorable and Adverse Sales Price Variance

If actual price is more than standard price, then it is favorable situation for the organization (favorable sales price variance). When the actual price is lower than standard price, then it is adverse situation for company.

Reasons for favorable Sales Price Variance

Reasons for improved or increased sales prices are inflation in the economy, reduced competition in the market and better product responses.

Reasons for adverse Sales Price Variance

Reasons for adverse sales price variance includes deflation in the economy, high competition in the market and low customer response.

Sales Price Variance Formula Practice Question

Quantity of material Sold = 1800

Standard Price of material = 16

Actual Price = 13