Have a question on the sales volume variance, I seem to be getting a different answer.
Budgeted sales: $1,600
Actual sales: $1,850
Variance: 1,850-1,600 = $250 F
In your lecture, the volume variance is $560 F.
I believe the Selling price and cost figures in the actual sales is meant to be for the budgeted sales and looks like it has been switched round when looking at the notes. But I understand the principle and how you got to your final answer.
Thank you.
J
John MoffatTutor·
The sales volume variance is the difference between the budgeted profit and the actual sales at standard profit.
M
MokoneBatloung·
I also have the same confusion as I cannot understand why sales variances are done on a profit or contribution and not on the selling price. Is it a rule or can it have a logical explanation as to why?
J
John MoffatTutor·
If you sell more of a product then although you get more sales revenue you also have more costs. So selling more means more profit.
T
ttlayur·
Hi, is the sales margin variance- the word used in the example the same as sales volume variance?
V
Vivi·
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.
J
John MoffatTutor·
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.
K
Kamran·
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.
J
John MoffatTutor·
Because the purpose of the variance analysis is to identify why the actual profit differs from the budgeted profit.
J
John MoffatTutor·
That is correct.
J
JojoBeat·
Greeting Sir,
What’s the formula for market share variance?
J
John MoffatTutor·
It isn't a formula exam :-)
If you have a problem with a specific question on this then please ask in the Ask the Tutor Forum.
J
JojoBeat·
Hello Sir,
Doesn't quantity and volume variance mean the same thing?
J
John MoffatTutor·
No. The volume variance is the mix variance plus the quantity variance.
Y
yup·
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?
T
Tackese·
Now it all makes sense. Thank you for this explanation.
J
Jatin·
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’t 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
J
John MoffatTutor·
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.
J
Jatin·
Thank you Sir!
J
John MoffatTutor·
You are welcome :-)
I
Ibrahim·
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?
J
John MoffatTutor·
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.
K
Kim·
Hi John and thanks for the great lecture - you really do make the variances seem so logical! :)
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? :)
TIA,
Kim
J
John MoffatTutor·
The total sales margin variance is the total volume variance.
K
Kim·
Thank you, that makes sense! :)
I
Ibrahim·
Dear John,
Thank you so much sir, for your effort and appreciated time.
J
John MoffatTutor·
Thank you for your comment :-)
A
Apoorva·
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.
J
John MoffatTutor·
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).
C
chak lam·
Hi John,
I was confused, for the sales volume variance, how do you determine whether to use standard profit or actual profit?
Thanks in advance.
J
John MoffatTutor·
For the volume variance we always use standard profit (or contribution if marginal costing).
F
Fahad·
John, I was just confused, why in Quantity variance, we compared standard mix with Budgeted mix instead actual Mix ?
Thanks
J
John MoffatTutor·
Because we are separating out the effect of a change in the total quantity and a change in the mix - so we look at the effect of each of them on their own.
F
Fahad·
Thanks John
J
John MoffatTutor·
You are welcome :-)
J
John MoffatTutor·
You are welcome :-)
A
alie2018·
Thanks John. Great lecture. The sales volume variance can be split into sales mix and sales quantity variance.
A
Avery·
thank you so much sir
J
John MoffatTutor·
You are welcome :-)
A
Avery·
Sir,
are sales price variance and sales volume variance together called sales margin variance?
A
Avery·
or is it just the sales price variance?
thank you
J
John MoffatTutor·
Just the sales price variance :-)
M
Michael·
Thanks for the good work John.?
I don't quite understand your response to Jareerabedin's question. Are you saying that the total sales margin variance is the same as the sales price variance? If so, why are they then separated in the question??
I had thought it is:
= 180*(6-3) + 150*(4-4) + 170*(1-6)
= 540 + 0 + (850)
= 310 (Adverse).
J
John MoffatTutor·
Sorry but I don't understand my response either!! (It was six months ago and I must have misunderstood the question)
You are correct - it is the total variance.
M
Michael·
Ow, thanks a lot for the clarity.
N
Natalie·
Sir, a bit confuse regarding the sales margin variance, refer to example 4, $210 is talking about total variance or sales margin variance?
Mix variance $160(F) + qty variance $400(F) = $560 volume variance (F)
May I confirm price variance $770(A) = sales margin variance?
Thanks for the lecture.
Have a question on the sales volume variance, I seem to be getting a different answer.
Budgeted sales: $1,600
Actual sales: $1,850
Variance: 1,850-1,600 = $250 F
In your lecture, the volume variance is $560 F.
I believe the Selling price and cost figures in the actual sales is meant to be for the budgeted sales and looks like it has been switched round when looking at the notes. But I understand the principle and how you got to your final answer.
Thank you.
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 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.
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.
What’s the formula for market share variance?
If you have a problem with a specific question on this then please ask in the Ask the Tutor Forum.
Doesn't quantity and volume variance mean the same thing?
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?
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’t 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
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.
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?
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? :)
TIA,
Kim
Thank you so much sir, for your effort and appreciated time.
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.
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).
I was confused, for the sales volume variance, how do you determine whether to use standard profit or actual profit?
Thanks in advance.
Thanks
are sales price variance and sales volume variance together called sales margin variance?
thank you
I don't quite understand your response to Jareerabedin's question. Are you saying that the total sales margin variance is the same as the sales price variance? If so, why are they then separated in the question??
I had thought it is:
= 180*(6-3) + 150*(4-4) + 170*(1-6)
= 540 + 0 + (850)
= 310 (Adverse).
You are correct - it is the total variance.
Mix variance $160(F) + qty variance $400(F) = $560 volume variance (F)
May I confirm price variance $770(A) = sales margin variance?