LSBF Question Bank 2019/2020 Section A Question 81 Page 38

Dear Sir

I am uncertain about the Answer given in the LSBF Question Bank 2019/20 Regarding Section A Question 81 on Page 38 The question is written below

Question 81) D Ltd manufactures and sells musical instruments, and uses a standard cost system. The 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.

The actual sales achieved were 600 units at $86 per unit.

What is the selling price planning variance?

According to the Answers sections in the LSBF Question Bank 2019/20:

Answer is: (£72-$82) x 600 = $6000 Adverse

However I think it should be $6000 Favourable because:

Actual Sales at Revised selling price = 600 units x $82 = $49200

Actual Sales at Standard selling price = 600 units x $72 = $43200

$49200 – $43200 = $6000

Shouldn’t the Answer be $6000 Favourable because the Revised Amount calculated above: $49200 is greater than the Standard Amount calculated above: $43200.

I thought the Revised takes priority over the Standard?

Am I mistaken?

Can you please assist me with my query.

Thank you SIr.