Sales volume variance

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Sales volume variance
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Sales volume variance reports the difference between actual and budgeted sales priced at the budgeted contribution per unit. This variance merely indicates whether sales volume is greater or less than expected. It does not indicate how well sales management has performed. In order to appraise the performance of sales management, actual sales volume should be compared with an ex-post estimate that reflects the market conditions prevailing during the period[1]

The favourable sales volume variance indicates that profit was better than budget because on balance more units were sold than budgeted. However the favourable variance may be due to selling a larger proposition of the more profitable product (sales mix variance) or selling more units in total (sales quantity variance)[2].

Profit Variance Analysis for a single product

Profit variance analysis is simplest in a single product firm- there is only one sales price, one set of costs (or cost price), and a unitary sales volume. The total volume variance is the difference between the sales volume variance and the cost volume variance[3]:

  1. sales price variance = (actual cost- budget or standard cost) x actual sales
  2. cost price variance = (actual cost- budget or standard cost) x actual sales
  3. sales volume variance = (actual sales- budget or standard sales) x budget or standard price
  4. cost volume variance = (actual sales- budget or standard sales) x budget or standard cost per unit
  5. total volume variance = sales volume variance- cost volume variance

Calculation of variances for multiproduct firms

When a firm produces more than one product, there is a fourth component of the profit variance. This is the sales mix variance, the feet on profit of selling a different proportionate mix of products have different contribution margins. In a multiproduct firm, actual sales volume can differ from that budgeted in two ways. The total number of units sold could differ from the target aggregate sales. In addition, he mix of the products actually sold may not proportionate to the target mix. Each of these two different types of changes in volume is reflected in a separate variance.

The total volume variance is divided into the two: the sales mix variance and the sales quantity variance. These two variances should be used to evaluate the marketing department of the firm. The sales mix variance shows how well the department has done in terms of selling the more profitable products, while the sales quantity variance measures how well the firm has done in terms of its overall sales volume[4].


  1. C.M. Drury 2013, p.565
  2. ACCA Skills Performance Management Study 2014, p.302
  3. J.K. Shim, J.G. Siegel, N. Dauber 2008, p.491
  4. J.K. Shim, J.G. Siegel, A.I. Shim 2012, p.316


Author: Sylwia Jurkowska