In variance analysis, what do 'Should' and 'Did' represent in the context of sales price variance?

In variance analysis, what do 'Should' and 'Did' represent in the context of sales price variance?

• A. Should equals actual units multiplied by the standard price per unit; Did equals actual revenue achieved
• B. Should equals budgeted revenue; Did equals actual revenue
• C. Should equals standard cost per unit; Did equals budgeted revenue
• D. Should equals actual revenue; Did equals revenue that should have been achieved

Answer: (A)

In sales price variance, the focus is on how the actual selling price compares to the standard price for the actual level of activity. The “Should” revenue is the amount that would have been earned if the actual quantity sold had been sold at the standard price—i.e., actual units multiplied by the standard price per unit. The “Did” revenue is the actual revenue that was earned, i.e., actual price per unit multiplied by actual units. So the correct statement is that Should equals actual units × standard price per unit, and Did equals actual revenue achieved. For example, if 1,000 units are sold at a actual price of 12 and the standard price is 10, Should = 1,000 × 10 = 10,000, Did = 1,000 × 12 = 12,000, giving a 2,000 favorable variance.

In sales price variance, the focus is on how the actual selling price compares to the standard price for the actual level of activity. The “Should” revenue is the amount that would have been earned if the actual quantity sold had been sold at the standard price—i.e., actual units multiplied by the standard price per unit. The “Did” revenue is the actual revenue that was earned, i.e., actual price per unit multiplied by actual units. So the correct statement is that Should equals actual units × standard price per unit, and Did equals actual revenue achieved. For example, if 1,000 units are sold at a actual price of 12 and the standard price is 10, Should = 1,000 × 10 = 10,000, Did = 1,000 × 12 = 12,000, giving a 2,000 favorable variance.