Page 196 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 9: Variance Analysis

Solution: Notes

Sales value variance = Actual Sales – Standard Sales

First step is to find out the Actual Sales
Actual Sales = Actual Quantity × Actual Price
Actual Sales (A) = 500 × ` 31= ` 15,500
Actual Sales (B) = 100 × ` 24 = ` 2,400

Next step is to find out the standard quantity of sales
Standard Quantity of Sales = Standard Quantity × Standard Sales
Standard Sales (A) = 400 × ` 30 = ` 12,000
Standard Sales (B) = 200 × ` 25 = ` 5,000
Sales Value Variance (A) = ` 15,500 – ` 12,000 = ` 3,500 (Favourable)

Sales Value Variance (B) = ` 2,400 – ` 5,000 = ` 2,600 (Adverse)
Total Sales Value Variance = ` 900 (Favourable)

Sales Price Variance:
Sales Price Variance = (Actual Price – Standard Price) Actual Quantity
Sales Price Variance (A) = 500 (` 31 – ` 30) = ` 500 (Favourable)
(B) = 100 (` 24 – ` 25) = ` 100 (Adverse)

= ` 400 (Favourable)

Sales Volume Variance:
Sales Volume Variance = Standard Price (Actual Quantity – Standard Quantity)
Sales Volume Variance (A) = ` 30 (500 – 400) = ` 3,000 (Favorable)

(B) = ` 25 (100 – 200) = ` 2,500 (Adverse)
= ` 500 (Favourable)

Sales Mix Variance:
Sales Mix Variance = Standard Price (Actual Quantity – Revised Standard Quantity)

First step in the process of computing the sales mix variance is the revised standard quantity.
As far as this problem concerned, sales mix variance would not arise due to equivalent mixes
dealt in the problem viz. standard (budgeted) mix and actual mix amounted 600 each.

Though it is having equal volumes, revised standard quantity can be computed.
Standard Quantity
Revised Standard Quantity = × Total Actual Quantity
Total Standard Quantity
400
RSQ for A = ×600 = 400
600
200
RSQ for B = ×600 = 200
600

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