Sales Price Variance

By
rjonesx
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What is ‘Sales Price Variance’

The difference between the amount of money a business expects to sell its products or services for and the amount of money it actually sells its products or services for. Sales price variance means that a business will be more or less profitable than it anticipates over a given time period. As a result, sales price variances are said to be either “favorable” or “unfavorable.”

Sale price variance = (actual selling price – anticipated price) * # units sold

Explaining ‘Sales Price Variance’

Let’s say a clothing store has 50 shirts that it expects to sell for $20 each, which would bring in $1,000. Unfortunately, the shirts are sitting on the shelves and are not selling, so the store has to discount them to $15. It does sell all 50 shirts at the $15 price, bringing in $750. The store’s sales price variance is $1,000 minus $750, or $250, and the store will earn less profit than it expected to.

Further Reading

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