Sales Variances (Cambridge (CIE) A Level Accounting): Revision Note

Brakes Ltd make brake pads. Here is the annual budgeted and actual information:

Calculate:

(i) sales price variance

(ii) sales volume variance

(iii) total sales variance

Answer:

(i) Sales Price Variance

Find the actual quantity sold

$252 000 ÷ $42 = 6 000 units

Use the formula

• actual quantity sold × (actual selling price – standard selling price)

• It is adverse because the actual selling price is less than budgeted selling price

6 000 × ($42 - $45)

$18 000 Adverse

(ii) Sales Volume Variance

Find the standard quantity sold

$225 000 ÷ $45 = 5 000 units

Use the formula

• standard selling price × (actual quantity sold – standard quantity sold)

• It is favourable because the actual number sold is more than the budgeted quantity

$45 × (6 000 - 5 000)

$45 000 Favourable

(iii) Total Sales Variance

Combine the variances

Alternatively, you can use the formula

• (actual quantity × actual selling price) - (standard quantity × standard selling price)

(6 000 × $42) - (5 000 × $45)

$27 000 Favourable