CIMA BA2 Syllabus C. PLANNING AND CONTROL - Sales Variances - Notes ^{7 / 9}

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

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 marginal costing?

Solution

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)

Illustration - Sales price Variance

A company's annual sales budget includes 1,500 units of a product at a selling price of $400. 

Each unit has a budgeted contribution to sales ratio of 30%.

Actual sales were 1,630 units at an average selling price of $390. 

The actual contribution to sales ratio was 28%.

What is the sales price variance?

1630 units should have generated revenue of $400/each = $652,000
1630 units did generate revenue of $390/each = $635,700 (Less than expected so Adverse)

= ($16,300) Adverse

Illustration - Sales Volume Variance

A company's sales budget includes 800 units of a product at a selling price of $300.

Each unit has a budgeted contribution to sales ratio of 30%. 

Actual sales were 720 units at an average selling price of $275. 

The actual contribution to sales ratio was 32%. 

What is the sales volume contribution variance?

Budgeted volume 800 units
Actual volume 720
80 Less units sold, therefore Adverse x Standard contribution/unit ($300 x 30% = $90) = ($7,200) Adverse