What is Sales Price Variance?
Sales price variance is the difference between actual and budgeted revenue caused by a change in selling price, holding quantity constant. It is computed as (actual price – budgeted price) x actual units sold. A favorable variance arises when the company sells at a price higher than budget.
How It Works
- Compare the actual average selling price to the budgeted price.
- Multiply the difference by the actual quantity sold.
- Investigate the cause: discounts, mix shift, market dynamics.
- Combine with volume variance for a full revenue analysis.
Saudi Context
Saudi retailers and distributors run sales price variance reports monthly to evaluate promotional pricing and dynamic price moves.
Example
Budget SAR 100 per unit, actual SAR 95, 11,000 units sold. Sales price variance = (95 – 100) x 11,000 = -SAR 55,000 unfavorable.