Question

Sales variances may be computed in a manner similar to cost variances–that is, computing both price and volume variances.

Answer 1

Answer:

The answer is True.

Step-by-step explanation:

Sales variance is computed in same manner as cost variance that is computing both price and volume variance. However interpretation of end result will not be same. For example in material price variance if

A = actual purchase price = $ 4, B = standard purchase price= $ 5 and Qt= quantity purchased = 500 units then

Material price varaince = 500 (5-4) = 500,

This gives us favourable price variance of 500 dollars. However in sales price variance if

A = actual sales price = $ 4, B = standard sale price= $ 5 and Qt= quantity sold = 500 units then

Sale price varaince = 500 (5-4) = (500)

This gives us unfavourable sales price variance of 500 dollars.

This show that formulas to compute variances are same but sale price decrease give us un favorable variance and cost price decrease gives us favorable price variance and vice versa.