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Sales Mix Variance – Variance analysis – ACCA Performance Management (PM)

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  1. Good day,
    Based on the lecture as well as the comments section, I’m a bit confused. Is the sales volume and sales margin variance the same thing? The question asked for the sales margin variance but in the lecture, it was sales volume which was calculated. If they are different, can you please explain how?
    Thank you.

    • The sales margin variance is the total sales variance and is the different between the actual sales at actual profit or contribution (with costs at standard cost) and budgeted sales at standard profit or contribution.

      The sales volume variance is the difference between the actual sales at standard profit or contribution and the budgeted sales at standard profit or contribution (just as in basic variances). This is analysed into the mix variance and the quantity variance.

  2. Dear John,

    While calculating the Sales volume variance, why we had to multiply the actual and budgeted sales units with the budgeted profit figure? why we couldn’t multiply these units with budgeted sales price only? Just to understand the logic behind it.

  6. 1 Sales Margin Variance : Actual Sales x Actual profit & Budgeted Sales x Standard profit
    Note : Actual profit (i.e. Actual S.P. – Budgeted Cost – here the actual cost is completely ignored,cause it comes under cost variance)
    (Also note the sales volume variance and Sales price variance comes under sales margin variance)
    Answer : 210 (A) (not there in video) (i.e. 770(A) – 560(F) see below)

    2 Sales Price variance : Keep Actual Sales volume same – Actual Selling Price vs. Standard Selling price Answer : 770 (A) (4:40 in video)
    3 Sales Volume variance : Keep Standard Profit/Cont. same – Actual vs. Budgeted Sales volume variance Answer : 560 (F) (9:40 in video)
    3 (i) Sales Mix Variance : Keep Actual Sales Volume & Standard profit same – Actual mix vs. Standard mix Answer : 160 (F) (16min:35)
    3 (ii) Sales Quantity Variance : Keep Standard mix & Standard profit same – Budget sales Volume vs. Actual Answer : 400 (F) (20th min)
    i.e.{160(F) + 400 (F) = 560 (F) } – 770 (A) = 210 (A)

    Is this right?

  7. Hello Sir,

    Hope you are safe and well!

    I wanted to ask if the Sales Margin Variance and Sales Volume variance is the same? If they are, then why do we use Actual Profit for actual sales, in case of volume variance shouldn鈥檛 we suppose to use the budgeted contribution/profit so as to check whether we are making profit or loss looking at budget figures?

    Thanks in advance,
    Jatin Gupta

    • No, they are not the same.

      The sales margin variance is the total sales variance and is the different between the actual sales at actual profit or contribution (with costs at standard cost) and budgeted sales at standard profit or contribution.

      The sales volume variance is the difference between the actual sales at standard profit or contribution and the budgeted sales at standard profit or contribution (just as in basic variances). This is analysed into the mix variance and the quantity variance.

  8. Dear John,
    How are you?
    Hope you are doing well,
    Actually sir I see questions about sales market variance and share market variance which haven’t been covered in your lessons lecture.
    What about that?

    • They do not warrant extra lectures. Partly because they have only been asked once in the exam (as a 2 mark question) and partly because it tests understanding of variances rather than learning extra rules.

  9. Hi John and thanks for the great lecture – you really do make the variances seem so logical! 馃檪

    I got myself confused after reading the example in the study notes again and then the thread of comments here… it does ask for total sales margin variance, and in the lecture you discuss sales price and sales volume, where the latter is split into sales mix and sales quantity. I’m just wanting to get my head around the different terms so I don’t get all confused and overwhelmed in the exam – what does total sales margin variance refer to? 馃檪

    TIA,
    Kim

  11. Hello,
    The sales variance I learnt had two parts
    1. Sales Value variances (5 variances) Analysed using selling price per unit.
    2. Sales Margin Variances (5 variances) analysed using Contribution/ profit for MC or AC respectively..
    But here you taught that sales price variance is solved using SP and other variances using Contribution/ Profit.
    I want to know if the variances you taught in this lecture are the only ones gonna come in the exam and if we are asked to find out Total Sales margin variance what should we use selling price or contribution/profit and which 2 variances put together will give us total sales margin variance ?
    Thank you so much.

    • My lectures cover everything that can be asked in the exam.

      The syllabus makes no reference to ‘sales margin’ variances. Instead they are referred to as ‘sales volume variance’ which is the total of the ‘sales mix’ and ‘sales quantity’ variances, as I explain in my lectures. These variances use the standard contribution or standard profit (depending on whether it is absorption or marginal costing).

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