Calculate a direct-sales price variance
Compare actual selling price with standard price for the actual sales quantity and investigate the market response.
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. Topic 4.2 teaches standard costing, the listed material, labour, fixed-overhead and sales variances, their causes and relationships, and evidence-based business decisions. Practice is self-checked, not an official Cambridge grade. Full timed Papers 1–4 and human subject-teacher review remain outstanding.
Before you begin
- Use Topic 2.1–2.2 cost behaviour, contribution and absorption-costing ideas. In each question, identify the period, actual output, budget and standard before calculating a variance.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
If actual selling price exceeds the standard price, the sales-price variance is…
What you will learn
- Apply the sales-price variance formula
- Use actual quantity sold
- Explain price and customer response together
Hold actual sales quantity constant
Sales-price variance = (actual selling price − standard selling price) × actual quantity sold. A higher actual price gives favourable revenue variance; a lower actual price gives an adverse variance, under this convention.
This isolates price for the actual volume. It does not measure how quantity sold changed; that is the sales-volume variance.
Sales-price variance = (AP − SP) × actual quantity sold
A higher price can affect demand
A price increase may raise revenue per unit but reduce quantity sold. A discount can make the price variance adverse while increasing sales volume. Analyse both and then consider contribution/profit and customer response.
Use actual revenue and the stated standard price basis. Check product mix, discounts, returns and whether prices or quantities are comparable across periods.
Pause and explain
AP=$12.50, SP=$12, actual quantity=2,000. What is the variance?
Worked example
Standard selling price is $40 per unit. Actual sales are 1,600 units at $39.25. Calculate the sales-price variance.
Show the worked solution
- Price difference = $39.25 − $40 = −$0.75.
- Multiply by 1,600 units: −$0.75 × 1,600 = −$1,200.
- Actual revenue is lower for the sold quantity, so it is adverse.
Answer $1,200 adverse sales-price variance.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
SP is $18 per unit; AP is $17.40; 3,500 units are sold. Calculate the variance.
Give me a hint
Compare actual and standard price for the 3,500 units.
Compare my reasoning
- Price difference = 17.40 − 18.00 = −$0.60.
- $0.60 × 3,500 = $2,100.
- Actual revenue is below the standard comparison.
$2,100 adverse sales-price variance.
Look for these in your work
- Price difference correct
- Use actual sales quantity
- Label lower revenue adverse
A shop sells 4,200 units at $26.50 against a standard $25.75. Calculate the sales-price variance.
Give me a hint
Multiply the $0.75 premium by actual quantity.
Compare my reasoning
- Price difference = $0.75 per unit.
- $0.75 × 4,200 = $3,150.
- Actual revenue is higher than standard for those units.
$3,150 favourable.
Look for these in your work
- Difference is $0.75
- Variance equals $3,150
- Revenue direction favourable
A concert venue raises ticket prices and has an adverse sales-volume variance but a favourable sales-price variance. What should it calculate before deciding whether the change worked?
Give me a hint
Review both revenue variances, contribution/profit, capacity and audience response.
Compare my reasoning
- Combine the revenue effects on a consistent basis.
- Compare extra revenue per ticket with contribution or profit lost from fewer attendees.
- Review attendance, customer mix and future demand before retaining the new price.
The price variance alone is insufficient. Compare the favourable price effect with the volume/profit impact and relevant attendance and customer evidence.
Look for these in your work
- Both price and volume considered
- Profit measure used
- Market evidence included
Common mistakes
- Using budgeted quantity instead of actual sales
- Calling a price variance profit without accounting for variable cost
- Ignoring a volume effect after a discount or price rise
What can you explain now?
Which sales quantity is used in the sales-price variance?
Compare with the explanation
Actual quantity sold
The price effect applies to the units actually sold.
After trying it yourself, choose your next review. This is your self-assessment.
Your review choice appears on Today. Sign in to sync it across devices.
Make it stick
Why does a favourable sales-price variance not guarantee higher profit?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.