A company had standard price $1.79 per unit and expected to sell 10,000 units. Actual price is $1.59 per unit and actual sales volume is 9,500 units. What is the sales volume variance?

A company had standard price $1.79 per unit and expected to sell 10,000 units. Actual price is $1.59 per unit and actual sales volume is 9,500 units. What is the sales volume variance?

• A. $895 Favorable
• B. $895 Unfavorable
• C. $1,895 Unfavorable
• D. $0

Answer: (B)

Sales volume variance measures how revenue changes when you sell a different quantity than planned, valued at the standard price per unit. Here, the planned volume is 10,000 units and the actual volume is 9,500 units, so the volume difference is -500 units. Using the standard price of 1.79 per unit, the impact is -500 × 1.79 = -895. Since selling fewer units than planned reduces revenue, this variance is unfavorable by 895. The actual selling price (1.59) doesn’t affect this variance; it would affect the sales price variance, which would be (1.59 − 1.79) × 9,500 = -1,900. The total revenue variance would then be -895 plus -1,900, totaling -2,795.

Sales volume variance measures how revenue changes when you sell a different quantity than planned, valued at the standard price per unit. Here, the planned volume is 10,000 units and the actual volume is 9,500 units, so the volume difference is -500 units. Using the standard price of 1.79 per unit, the impact is -500 × 1.79 = -895. Since selling fewer units than planned reduces revenue, this variance is unfavorable by 895. The actual selling price (1.59) doesn’t affect this variance; it would affect the sales price variance, which would be (1.59 − 1.79) × 9,500 = -1,900. The total revenue variance would then be -895 plus -1,900, totaling -2,795.