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Sales Price Variance

What is '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

Explaining '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.


Further Reading


Revisions in repeat‐sales price indexes: here today, gone tomorrow?
onlinelibrary.wiley.com [PDF]
… the first to propose that prices may contain a drift term that would allow the second sale prices to drift … Revisions in Repeat-Sales Price Indexes: Here Today, Gone Tomorrow … Therefore, the large constant terms in Table 1 suggest that the weighted repeat sales (WRS) model is …

A flexible Fourier approach to repeat sales price indexesA flexible Fourier approach to repeat sales price indexes
onlinelibrary.wiley.com [PDF]
… the first to propose that prices may contain a drift term that would allow the second sale prices to drift … Revisions in Repeat-Sales Price Indexes: Here Today, Gone Tomorrow … Therefore, the large constant terms in Table 1 suggest that the weighted repeat sales (WRS) model is …

The capital asset pricing model (CAPM), short-sale restrictions and related issuesThe capital asset pricing model (CAPM), short-sale restrictions and related issues
www.jstor.org [PDF]
… the first to propose that prices may contain a drift term that would allow the second sale prices to drift … Revisions in Repeat-Sales Price Indexes: Here Today, Gone Tomorrow … Therefore, the large constant terms in Table 1 suggest that the weighted repeat sales (WRS) model is …

Short holds, the distributions of first and second sales, and bias in the repeat-sales price indexShort holds, the distributions of first and second sales, and bias in the repeat-sales price index
books.google.com [PDF]
… the first to propose that prices may contain a drift term that would allow the second sale prices to drift … Revisions in Repeat-Sales Price Indexes: Here Today, Gone Tomorrow … Therefore, the large constant terms in Table 1 suggest that the weighted repeat sales (WRS) model is …

How is macro news transmitted to exchange rates?How is macro news transmitted to exchange rates?
www.sciencedirect.com [PDF]
… the first to propose that prices may contain a drift term that would allow the second sale prices to drift … Revisions in Repeat-Sales Price Indexes: Here Today, Gone Tomorrow … Therefore, the large constant terms in Table 1 suggest that the weighted repeat sales (WRS) model is …

List prices, sale prices and marketing time: an application to US housing marketsList prices, sale prices and marketing time: an application to US housing markets
onlinelibrary.wiley.com [PDF]
… the first to propose that prices may contain a drift term that would allow the second sale prices to drift … Revisions in Repeat-Sales Price Indexes: Here Today, Gone Tomorrow … Therefore, the large constant terms in Table 1 suggest that the weighted repeat sales (WRS) model is …

Accounting for taste: Art and the financial markets over three centuriesAccounting for taste: Art and the financial markets over three centuries
www.jstor.org [PDF]
… the first to propose that prices may contain a drift term that would allow the second sale prices to drift … Revisions in Repeat-Sales Price Indexes: Here Today, Gone Tomorrow … Therefore, the large constant terms in Table 1 suggest that the weighted repeat sales (WRS) model is …

List price and sales prices of residential properties during booms and bustsList price and sales prices of residential properties during booms and busts
www.sciencedirect.com [PDF]
… the first to propose that prices may contain a drift term that would allow the second sale prices to drift … Revisions in Repeat-Sales Price Indexes: Here Today, Gone Tomorrow … Therefore, the large constant terms in Table 1 suggest that the weighted repeat sales (WRS) model is …

Contract expiration and sales priceContract expiration and sales price
link.springer.com [PDF]
… the first to propose that prices may contain a drift term that would allow the second sale prices to drift … Revisions in Repeat-Sales Price Indexes: Here Today, Gone Tomorrow … Therefore, the large constant terms in Table 1 suggest that the weighted repeat sales (WRS) model is …

A mean-variance synthesis of corporate financial theoryA mean-variance synthesis of corporate financial theory
www.jstor.org [PDF]
… the first to propose that prices may contain a drift term that would allow the second sale prices to drift … Revisions in Repeat-Sales Price Indexes: Here Today, Gone Tomorrow … Therefore, the large constant terms in Table 1 suggest that the weighted repeat sales (WRS) model is …



Q&A About Sales Price Variance


How can you calculate sales price variance?

You can calculate sales price variance by taking (actual selling price - anticipated selling price) * units sold.

What is the difference between sales price variance and sales volume variance?

Sales price variance is 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 volume variance is the difference between the actual number of units sold and anticipated number of units sold.

Why would a business want to have favorable sales price variances?

A business wants to have favorable sales price variances because it means that they will be more profitable than they had originally expected. Favorable variances mean that a company has been able to sell their product at a higher rate than they had originally planned, which means that they are making more profit than they had initially thought possible. This also means that customers are willing to pay more for your product, so this could be an indication that your product has increased in value over time. Unfavorable variances mean that you are not making as much profit as you had hoped, which may indicate that your product's value has decreased over time or customer interest in your product has waned significantly since you first began selling it. This could also indicate problems with pricing strategy or production costs associated with producing your particular good or service, so these issues should be addressed immediately if unfavorable variances continue to occur on a regular basis.

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