How is sales price variance calculated?

Sales price variance is calculated by taking the actual units sold and multiplying them by the difference between the actual selling price and the standard selling price. This calculation provides insight into how much of the revenue variance is due to the difference in pricing rather than the volume of sales.

Using this formula, if the actual selling price is higher than the standard price, the sales price variance will be positive, indicating that the company has generated more revenue than expected based solely on price. Conversely, if the actual price is lower than the standard price, the variance will be negative, suggesting a shortfall in revenue due to pricing issues. This variance analysis is particularly useful for management as it highlights areas where pricing strategies may need to be adjusted to enhance profitability.

The other options focus on different aspects of sales performance rather than directly addressing how price variance is determined. This highlights the importance of understanding where variances arise in financial performance analysis.