Question

Amar Ltd furnishes the following information relating to budgeted sales and actual sales for the month of March 2010.

PRODUCT	STANDARD UNITS	STANDARD RATE (INR)	ACTUAL UNITS	ACTUAL RATE (INR)
A	1200	15	880	18
B	800	20	880	20
C	2000	40	2640	38

calculate :

(a) Sales price variance

(b) Sales volume variance

(c) Sales mix variance

(d) Sales quantity variance

Answer 1

Question A

Sales Price Variance = Actual Quantity Sold * (Actual Selling Price - Budgeted Selling Price)

For Product A

Actual Quantity Sold = 880 Units

Actual Selling Price per Unit = ₹ 18

Budgeted Selling Price = ₹ 15

Using Above formula for Sales Price Variance

Sales Price Variance for Product A = (18 - 15) * 880 = ₹ 2,640 Favourable

For Product B

Actual Quantity Sold = 880 Units

Actual Selling Price per Unit = ₹ 20

Budgeted Selling Price per Unit = ₹ 20

Using Above formula for Sales Price Variance

Sales Price Variance for Product B = (20 - 20) * 880 = ₹ 0

For Product C

Actual Quantity Sold = 2,640 Units

Actual Selling Price per Unit = ₹ 38

Budgeted Selling Price per Unit = ₹ 40

Using formula for Sales Price Variance

Sales Price Variance for Product C = (38 - 40) * 2,640 = (₹ 5,280) Unfavorable

Total Sales Price Variance = Sales Price Variance of Product A + Sales Price Variance of Product B + Sales Price Variance of Product C

Total Sales Price Variance = 2,640 + 0 + (5,280) = (₹ 2,640) Unfavorable Variance

Question B

Sales Volume Variance = Budgeted Selling Price per Unit * (Actual Quantity Sold - Budgeted Quantity)

For Product A

Budgeted Selling Price per Unit = ₹ 15

Actual Quantity Sold = 880 Units

Budgeted Quantity = 1,200 Units

Calculation of Sales Volume Variance using above formula

Sales Volume Variance = (880 - 1,200) * 15 = (₹ 4,800) Unfavorable Variance

For Product B

Actual Selling Price = ₹ 20

Actual Sales Quantity = 880 Units

Budgeted Sales Quantity = 800 Units

Calculation of Sales Volume Variance using above formula

Sales Volume Variance for Product B = (880 - 800) * 20 = ₹ 1,600 Favourable Variance

For Product C

Budgeted Selling Price = $ 40

Actual Sales Quantity = 2,640 Units

Budgeted Sales Quantity = 2,000 Units

Calculation of Sales Volume Variance using the above Formula

Sales Volume Variance for Product C = (2,640 - 2,000) * 40 = ₹ 25,600 Favourable Variance

Total Sales Volume Variance = Sales Volumes Variance of Product A + Sales Volume Variance of Product B + Sales Volume Variance of Product C

Total Sales Volume Variance = (4,800) + 1,600 + 25,600 = ₹ 22,400 Favourable Variance

Question C

Sales Mix Variance = Budgeted Selling Price per Unit * ( Actual Sales Quantity - Revised Actual Sales Quantity)

Revised Actual Sales Quantity means Actual Sales in the proportion of Budgeted Sales

Proportion of Budgeted Sales = 3:2:5

Revised Actual Sales Quantity for A = 4,400 * 3/10 = 1,320 Units

Revised Actual Sales Quantity for B = 4,400 * 2/10 = 880 Units

Revised Actual Sales Quantity for C = 4,400 * 5/10 = 2,200 Units

For Product A

Budgeted Selling Price per Unit = ₹ 15

Revised Actual Sales Quantity = 1,320 Units

Actual Sales Quantity = 880 Units

Calculation of Sales Mix Variance using above formula

Sales Mix Variance for Product A = (880 - 1,320) * 15 = (₹ 6,600) Unfavorable Variance

For Product B

Budgeted Selling Price per Unit = ₹ 20

Revised Actual Sales Quantity = 880 Units

Actual Sales Quantity = 880 Units

Calculation of Sales Mix Variance using Above formula

Sales Mix Variance for Product B = (880-880) * 20 = ₹ 0

For Product C

Budgeted Selling Price per Unit = ₹40

Revised Actual Sales Quantity = 2,200 Units

Actual Sales Quantity = 2,640 Units

Calculation of Sales Mix Variance using above formula

Sales Mix Variance for Product C = (2,640 - 2,200) * 40

Sales Mix Variance for Product C = ₹ 17,600 Favourable Variance

Total Sales Mix Variance = Sales Mix Variance of Product A + Sales Mix Variance of Product B + Sales Mix Variance of Product C

Total Sales Mix Variance = (6,600) + 0 + 17,600 = ₹ 11,000 Favourable Variance

Question D

Sales Quantity Variance = Budgeted Selling Price per Unit * (Revised Actual Sales Quantity - Budgeted Sales Quantity)

For Product A

Budgeted Selling Price per Unit = ₹ 15

Revised Actual Sales Quantity = 1,320 Units

Budgeted Sales Quantity = 1,200 Units

Calculation of Sales Quantity Variance using above Formula

Sales Quantity Variance for Product A = (1,320 - 1,200) * 15 = ₹ 1,800 Favourable Variance

For Product B

Budgeted Selling Price per Unit = ₹ 20

Revised Actual Sales Quantity = 880 Unitd

Budgeted Sales Quantity = 800 Units

Calculation of Sales Quantity Variance using Above Formula

Sales Quantity Variance for Product B =(880-800)* 20 = ₹ 1,600 Favourable Variance

For Product C

Budgeted Selling Price per Unit = ₹ 40

Revised Actual Sales Quantity = 2,200 Units

Budgeted Sales Quantity = 2,000 Units

Calculation of Sales Quantity Variance using Above Formula

Sales Quantity Variance for Product C = (2,200 - 2,000) * 40 = ₹ 8,000 Favourable Variance

Total Sales Quantity Variance = Sales Quantity Variance of Product A + Sales Quantity Variance of Product B + Sales Quantity Variance of Product C

Total Sales Quantity Variance = 1,800 + 1,600 + 8,000 = ₹ 11,400 Favourable Variance