How is sales price variance defined?

Sales price variance is defined as the difference between the actual sales price and the expected (standard) sales price, multiplied by the actual quantity of goods sold. This variance measures the impact of price changes on revenue.

The correct formulation for calculating sales price variance is based on multiplying the actual quantity sold by the difference between the actual price and the standard price. In the context of the choices provided, actual quantity sold is represented as AQ and standard price as SP. Thus, calculating sales price variance involves AQ x (AP - SP), but when considering the variance in terms of sales, it is typically expressed as AQ x SP for comparison to actual revenue.

Using the actual price in the calculation directly incorporates the price variance. Therefore, the formula of AQ x SP effectively captures the revenue generated based on the actual quantities sold at the standard price, serving as a pivotal reference point for determining how much variance is attributable to the price charged compared to standard expectations.