Sales Volume Variance

Posted in Marketing and Strategy Terms, Total Reads: 887
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Definition: Sales Volume Variance

It is the amount of change in contribution as a difference between the actual and budgeted sales values.


Formula for sales volume variance is as below:

(Actual Units Sold – Budgeted Unit Sales) x Standard profit/ Unit


This is where absorption costing is involved.


Also, (Actual Unit Sold - Budgeted Unit Sales) x Standard Contribution/Unit


This is where marginal costing is involved.


Sales Volume Variance is further divided into the following:

i) Sales Mix Variance

ii) Sales Quantity Variance

These help a company to make accurate estimates of the product’s future revenue.


Sales Mix Variance= (Actual Sales at Budget Mix – Budget Sales at budget mix) x Budget CM (or gross profit)/unit

Sales Quantity Variance= (Budgeted Sales – Unit Sales at Standard Mix) x Standard Contribution


 

The above graph shows the sales volume variances of the Audi, BMW and Mercedes in the year 2010 in a particular region.

 

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