Chapter 23, Problem 21QS

To determine

Concept Introduction:

Sales variance is the difference between the budgeted sales and the actual sales. Sales variance can be because of two reasons

• Actual selling price of the product varies from the budgeted selling price and/or
• Actual quantity of sales varies from the budgeted quantity.

Therefore, sales variance is the sum of (i) Sales Price Variance and (ii) Sales Volume Variance.

Sales Price Variance:

The difference between the actual selling price and the budgeted selling price is the Sales Price Variance.

Sales Volume Variance:

The difference between actual quantity of sales and budgeted quantity is the Sales Volume Variance.

The following formulas are used to calculate Sales variance:

Sales Variance= Sales Price Variance+ Sales Volume Variance

Also Sales Variance = Budgeted Sales − Actual Sales

Sales Price Variance = Actual Sales - Actual quantity of Sales at budgeted price

Sales Volume Variance = Actual quantity at budgeted price -Budgeted quantity at budgeted price

Sales variance gives a view of deviations from the set standards which can be wither favorable or unfavorable

Sales Price and Volume Variance