# Sales Price Variance

Sales price variance can be defined as the measure of the change or alteration in the sales price revenue or profit that results due to the change or the variance that occurs between the actual sales price and the anticipated sales price. The formula of sales price variance can be shown as under:-

Sales Price Variance = Actual Sales Price – Standard Sales Price x Actual Number of units sold

Or it can be also presented in the following two ways:-

Sales Price Variance = Actual price Actual number of units sold – Standard Price x Standard number of units sold

Sales Price Variance = Actual Sales Revenue – Standard Revenue of actual number of units sold

There are a number of methods of calculating sales price variance that can be explained as below:-

Let’s assume that XYZ is a fertilizer production company that is specialized in selling chemical and organic fertilizers. The sale of organic and chemical fertilizers by the company in the recent accounting period is as follows:-

 Material Quantity Actual Price Standard Price Chemical Fertilizer 200 tons \$ 380 per ton \$400 per ton Organic Fertilizer 300 tons \$660 tons \$600 per ton

Sales price variance can be calculated as

 Actual Price A Standard Price B A-B= C Units sold C C X D Chemical Fertilizer 380 400 20 200 4000 Organic Fertilizer 660 600 60 300 18000

Favorable Sales price variance indicates that the selling price is higher as compared to the anticipated price where as unfavorable sales price variance indicated actual selling price is low as compared to the anticipated price.