An unfavorable sales variance is most likely caused by which condition?

• A. Higher actual variable costs
• B. Selling units for less than the budgeted price
• C. Increased fixed costs
• D. Production inefficiency

Answer: (B)

The key idea is how actual revenue compares to budgeted revenue. An unfavorable sales variance shows up when revenue falls short of what was planned. Revenue is affected directly by the selling price per unit, so selling units for less than the budgeted price lowers total revenue, producing the unfavorable variance. For example, budgeting 100 units at a price of 10 yields 1,000 in revenue; if the actual price drops to 9.50, revenue becomes 950, a shortfall of 50. The other options describe cost increases, not revenue, so they don’t explain why sales revenue would be unfavorable.