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Which of the following situation is most likely to result in a favourable selling price variance?
A. The sales director decided to change from the planned policy of market skimming pricing to one of market penetration pricing.
B. Fewer customers than expected took advantage of the early payment discounts offered.
C. Competitors charged lower prices than expected, therefore selling prices had to be reduced in order to compete effectively.
D. Demand for the product was higher than expected and prices could be raised without adverse effects on sales volumes.
The answer is D.
Raising prices in response to higher demand would result in a favourable selling price variance.Could you explain the answer and why is not the other options (ie. Explain each option please).
As you will know from my free lectures, a favourable selling price occurs when the actual selling price per unit is higher than expected.
A, B, and C will all result in a lower selling price per unit.
D specifically starts that prices could be raised, and again higher selling price per unit gives a favourable variance.
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