Felter Company sold 8000 units of Product X last month. The actual production level was 9000 units. The budget selling price was $10, but the sales manager had to discount the products by 20 per cent before managing to sell these units. The sales price variance is

Question

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The sales price variance is calculated as the difference between the actual selling price and the budgeted selling price, multiplied by the number of units sold. The budgeted selling price is $10, and the actual selling price after a 20% discount is $8 ($10 - $10*20%). The variance for 8000 units sold is (10 - 8) * 8000 = $16,000 unfavourable, because the actual selling price is lower than the budgeted price.

Felter Company Sold 8000 Units of Product X Last Month