Sales Variance

Deals change is the contrast between genuine deals and spending deals. It is utilized to quantify the execution of a business capacity, and/or examine business results to better comprehend economic situations.

There are two reasons genuine deals can change from arranged deals: either the volume sold fluctuated from arrangement (deals volume difference), or deals were at an alternate cost from what was arranged (deals value fluctuation). Both situations could likewise at the same time add to the fluctuation.

For example: The plan was to sell 5 widgets at $3 each, for a budgeted sales of: (5*$3)=$15. In reality, 6 widgets were sold at $2 each, for an actual sales of: (6*$2)=$12. The total variance was thus ($12–$15)=$3 (U)nfavourable or minus $3, since total sales was less than planned.

Sales price variance

Sales Price Variance: The sales price variance reveals the difference in total revenue caused by charging a different selling price from the planned or standard price. The sales price variance is calculated as: Actual quantity sold * (actual selling price – planned selling price). In the example, the sales price variance was 6*($2–$3)= -$6 (U)nfavourable or minus $6, since the sales price was less than planned.

Sales volume variance

Sales Volume Variance is calculated as: budgeted selling price*(actual sales volume-budgeted sales volume)

Sales Volume Variance is further sub-divided into two variances.

  • Sales Mix Variance
  • Sales Quantity Variance

Total variance

The total variance can thus be seen algebraically to be (minus $6) plus (plus $3), giving (minus $3). Or: -6+3=-3.

This result tells us that the negative effect of selling at a lower price was twice the positive effect of selling at a higher volume than planned. This might have occurred where prices were lowered to increase volume, but actual volume increases

Download PDF File