ACCA MA · Chapter 13 · Question 8 of 10
A company has a favourable sales price variance and an adverse sales volume variance. Which of the following is the most likely explanation?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Selling prices were increased above standard, which reduced demand
Explanation
A higher price than standard gives a favourable price variance, but it can reduce the number of units sold, which gives an adverse volume variance. Discounts would have the opposite effect (adverse price, favourable volume), and a competitor raising prices or market growth would tend to increase volume.
More Overhead and sales variances and operating statements MCQs
- Q10Which of the following is the most likely cause of an adverse labour rate variance?
- Q1Budgeted fixed production overheads were $120,000, and actual fixed production overheads were $126,500. What is the fixed overhead…
- Q2Budgeted output was 10,000 units, with budgeted fixed overheads of $120,000 absorbed per unit. Actual output was 10,400 units. What is the…
- Q3Fixed overheads are absorbed at $8 per direct labour hour. Budgeted hours were 15,000, actual hours worked were 15,600, and the standard…
- Q4A company sold 4,800 units for total revenue of $129,600. The standard selling price is $28 per unit. What is the sales price variance?