Sales Price Variance Calculator
Answers the Question
How much more did we earn than expected?
Calculator for Sales Price Variance
What Is the Sales Price Variance?
The sales price variance is a simple, but effective, tool for determining how much more or less a given set of goods has earned across all sales.
Why Is it Important?
- Changes in sales price variances over time may indicate important shifts in both the price customers are willing to pay.
Formula(s) to Calculate Sales Price Variance
- SALES PRICE VARIANCE = (ACTUAL PRICE - ESTIMATED PRICE) * ACTUAL QUANTITY
- Not determining a realistic estimated price. There may be too many unknowns or too much political pressure that affect the estimation process.
- Not including seasonal or temporal changes in the price of goods when creating estimates. Some products may experience significant cost differentials when external demand shifts.
- Not realizing that unsold inventory, while not reflected in this formula, cannot be simply forgotten. It may make sense to reduce prices such that profit per sale decreases but total profit increases.
- Confusing sales price variance with profit. Products with negative sales variances may still prove quite profitable. On the other hand, products with positive sales variances may still cause the company to take a significant loss.