ACCA Question Bank 2019/20 LSBF (PM):= Section A MCQs – Question 81

Question 81)

D Ltd manufactures and sells musical instruments, and uses a standard cost system. Budget for production and sale of one particular drum for April was 600 units at a selling price of £72 each. When the sales director reviewed the results for April in the light of the market conditions that had been experienced during the month, she believed that D Ltd should have sold 600 units of this drum at a price of £82 each.

Actual sales achieved were 600 units at $86 per unit.

What is the selling price planning variance?

Selling price planning variance := difference between revised and standard (budgeted)

= (£82-£72) x 600 units = £10 x 600 units = £6000

I understand how to get the figure of £6000 variance.

How do you determine whether it is a Favourable variance or Adverse variance?

Thank you.