Sales Price Variance

AAA

DEFINITION of 'Sales Price Variance'

The difference between the amount of money a business expects to sell its products or services for and the amount of money it actually sells its products or services for. Sales price variance means that a business will be more or less profitable than it anticipates over a given time period. As a result, sales price variances are said to be either "favorable" or "unfavorable."


Sale price variance = (actual selling price - anticipated price) * # units sold

INVESTOPEDIA EXPLAINS 'Sales Price Variance'

Let's say a clothing store has 50 shirts that it expects to sell for $20 each, which would bring in $1,000. Unfortunately, the shirts are sitting on the shelves and are not selling, so the store has to discount them to $15. It does sell all 50 shirts at the $15 price, bringing in $750. The store's sales price variance is $1,000 minus $750, or $250, and the store will earn less profit than it expected to.



RELATED TERMS
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its ...
  2. Sales Mix

    The relative amounts purchased of each of the products or services ...
  3. Sales Mix Variance

    The difference in the quantity of customer purchases of each ...
  4. Organic Sales

    The term "organic sales" refers to revenue generated from within ...
  5. Sales Per Square Foot

    A popular sales metric used in the retailing industry. Sales ...
  6. Gross Sales

    A measure of overall sales that isn't adjusted for customer discounts ...
Related Articles
  1. Fundamental Analysis

    Great Expectations: Forecasting Sales Growth

    Predicting sales growth can be something of a black art, unless you ask the right questions.
  2. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  3. Investing Basics

    Understanding The Cash Conversion Cycle

    Find out how a simple calculation can help you uncover the most efficient companies.
  4. Markets

    How To Use Price-To-Sales Ratios To Value Stocks

    Take a look at how this effective ratio can be influenced by certain critical factors.
  5. Fundamental Analysis

    Analyzing Retail Stocks

    To analyze retail stocks, investors need to be aware of the most common metrics used. Find out what they are.
  6. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  7. Investing

    Doing More With Less: The Sales-Per-Employee Ratio

    If used properly, this ratio can give you insight into a company's productivity and financial health.
  8. Economics

    What is the Breakeven Point?

    In general, when gains or revenue earned equals the money spent to earn the gains or revenue, you’ve hit the breakeven point.
  9. Personal Finance

    Why Are Tesla Cars So Expensive?

    What makes Tesla cars so expensive? Short supply and pricey parts is a good place to start.
  10. Fundamental Analysis

    What is a Null Hypothesis?

    In statistics, a null hypothesis is assumed true until proven otherwise.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center