ACCA Performance Management (F5) Certification Practice Exam

Which equation correctly calculates total sales variance?

1. AQ x AP

2. AQ x SP

3. AQ x SM

4. BQ x SM

The correct answer is: AQ x SP

The total sales variance measures the difference between the actual sales and the expected sales based on budgeted figures. To calculate this variance, the correct computation involves actual quantity sold (AQ) multiplied by the standard price (SP) that was expected for those sales. This method captures the revenue that should have been generated based on the actual number of units sold at the standard selling price. The formula helps in assessing performance by highlighting how much sales revenue was achieved versus what was anticipated, allowing management to understand if there have been deviations from the budget. The other formulas do not reflect the proper calculation for total sales variance. For instance, while the actual quantity multiplied by actual price would yield total revenue, it wouldn't isolate the variance against the budget, which is the goal here. Similarly, other options do not align with standard cost accounting principles for variance calculation and mix actual results with other metrics that don't relate to standard price and quantity. By utilizing the actual quantity sold and the expected, budgeted selling price, the total sales variance gives a clear picture of sales performance relative to strategy, which is critical for financial analysis and decision-making.