If the actual selling price is $500, the actual result is $250, and 350 actual units are sold, the selling price variance is ____________?
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Answer: A. $87,500
Explanation
Selling price variance is computed as the difference between actual and budgeted selling prices multiplied by actual units sold. Calculating the price difference and multiplying it by 350 actual units sold yields the correct variance of 87500. Standard revenue variance formulas confirm that unit price discrepancies drive this specific sales performance metric. Selling price variance measures the financial impact of selling products at prices different from standard list prices. Sales managers analyze this variance to evaluate the effectiveness of discounting policies and market pricing strategies. Positive selling price variances indicate that products were successfully sold at higher-than-expected price points.
Retail and wholesale businesses track selling price variances to monitor revenue performance and sales team execution. Management uses these insights to adjust pricing structures in response to shifting consumer demand and competition. Understanding selling price variances helps companies maximize top-line revenue without sacrificing sales volume. Alternative options represent arithmetic calculation errors or fail to multiply by actual units sold. Other choices might confuse selling price variances with cost variance formulas used in manufacturing. Selecting wrong answers shows a lack of familiarity with revenue variance computation methods.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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