Sales price and volume variances

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Sales Variances

ACCA MA D2a Sales Variances graph

The sales price variance shows the effect on profit of selling at a different price from that expected.

sales price variance = actual units should have sold $x
actual units did sell $x
----
sales price variance $x (f/a)
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sales volume variance = budgeted sales volume x units
(absorption costing) actual sales volume x units
--------
sales volume variance in units x units (f/a)
x standard profit per unit $x
-------
sales volume variance in $ $x (f/a)
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sales volume variance = budgeted sales volume x units
(marginal costing) actual sales volume x units
------------
sales volume variance in units x units (f/a)
x standard contribution per unit $x
------------
sales volume variance in$ $x (f/a)
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Illustration - Sales volume variance

Budgeted sales units 8,500
Actual sales units 8,900
Standard contribution $28
Standard profit $10

What is the sales volume variance for absorption and marginal costing?

Solution

For absorption costing

Should sell 8,500
Did sell 8,900

Difference 400 x $10 (standard profit) = $4,000 Favourable Variance (Sold more than should have)

For marginal costing

Should sell 8,500
Did sell 8,900

Difference 400 x $28 (standard contribution) = $11,200 Favourable Variance (Sold more than should have)

Illustration - Sales price variance

Actual sales units 8,900
Actual revenue received $700,000
Standard selling price $100

What is the sales price variance?

Solution

8,900 should sell (8,900 x 100) = $890,000
8,900 did sell $700,000

Sales price variance is $190,000 Adverse (We did sell less than we should have)

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