All 38 Variance Analysis questions
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What is the difference between a budget and a standard? What are the two components of the direct materials variance? What are the two components of the direct labor variance? How is the variable overhead variance analyzed? How do variances reconcile budgeted profit to actual profit (an operating statement)? How do you decide which variances to investigate? What are the possible causes of an adverse material usage variance? What are the possible causes of an adverse labor efficiency variance? What are ideal, attainable, and basic standards? What is the sales mix variance?
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Budgeting & Forecasting › Variance Analysis

What are the sales variances (price and volume)?

Intermediate

Answer

The sales price variance is (actual price - standard price) x actual units sold, measuring the profit effect of selling above/below planned price. The sales volume variance is (actual units - budgeted units) x standard contribution (or standard profit), measuring the effect of selling a different quantity. Together they explain the revenue/contribution difference from plan.
Sales price = (AP - SP) x actual units.
Sales volume = (Actual units - Budget units) x std contribution.
Real-world example Discounting to win volume shows an adverse price but favorable volume variance.

Common follow-ups: What does the sales volume variance measure? | Contribution or profit per unit?

Variance Analysis Flexible Budgets Variance Analysis
All 38 Variance Analysis questions