Meaning Sales Price Variance

Sales price variance is variance due the difference between actual sales price and standard sales price. If actual sales price is more than standard sales price, this variance will be favorable or positive. If actual sales price is less than standard sales price, this variance will be unfavorable or negative. To calculate the sales price variance is important for checking the reasons of this variance. Following may be the main reasons of sales price variance.

Sales Price Variance's Reasons

1. Changing in the Market Trend

Main reason of sales price variance is to change the market conditions or trend. Suppose, we have planned our price as Rs. 100 of our product but actual price decreased due to recession in the market and it reached Rs. 50. Due to this, our unfavorable variance reached at Rs. 50 per product. If we have sold 1000 unit at Rs. 50, it means, we are adverse sales variance is Rs. 50,000

2. Mistake in Estimation of Price

To estimation of price is not very easy. When prices  goes up and down, at that time, we can do mistake for calculation of correct future price. Except of this, we have to estimate our different costs, if any cost is not estimated correctly, our price may be estimated wrongly.

3. Bargaining in the Market

When salesman goes to the market, it has to face bargaining problem, salesman has to sell his product. So, due to bargaining, it is not possible to calculate the correct price which will be in the future.

sales price variance formula

SPV = Actual Quantity of Sales X ( Actual Price - Standard Price )

Sales Price Variance Example

If actual sales price of pen is \$ 10 and standard sales price is \$ 13, we have sold 1000 units of pen, then sales price variance will be

SPV = 1000 X ( \$ 10 - \$ 13 ) = 1000 X 3 = \$ 3000 ( Unfavorable or adverse ) .

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