How to Calculate Selling Price Variance
Original post by Mark Kennan of Demand Media
Sales price variance measures the change in a company's total budgeted revenue to the actual revenue earned on a product. To figure the selling price variance, you need to know how many units you made, how much you expected to sell the units for, and the price at which you actually sold the units. A negative sales price variance means the product sold for a lower price than anticipated, and a positive sales price variance means the product sold for a higher price than anticipated.
Multiply the expected sales price by the number of units expected to be sold to find the total expected revenue. For example, if a company builds 300 units of a product, expecting to sell them at $90 each, multiply 300 by $90 to find the expected revenue equals $27,000.
Multiply the actual sales price by the number of units sold to find the total actual revenue. For example, if the company built 300 widgets and sold them at $85 each, multiply 300 by $85 to find the actual revenue equals $25,500.
Subtract the actual revenue from the budgeted price to find the sales price variance. In this example, subtract $27,000 from $25,500 to find the sales variance equals -$1,500.
- Accounting Tools: Selling Price Variance
- Business Dictionary: What is Selling Price Variance?
- Globusz Publishing: Variance Analysis
About the Author
Mark Kennan is a freelance writer specializing in finance-related articles. He has worked as a sports editor for "Ring-Tum Phi" and published articles on a number of online outlets. Kennan holds a Bachelor of Arts in history and politics from Washington and Lee University.
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