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Hi John, apologies if you have had this question before.
I just finished the lecture for this and was left a little confused.
The lecture did a great job of explaining how the mix and quantity variances feed into the volume variance. However, I was under the impression that the Price variance and volume variance (made up of the mix and quantity) variances should feed into the sales margin variance. I calculated the Sales margin variance to be 250 Favorable (Actual profit – Budgeted Profit). But, when you combine the Sales volume and price variances I come up with 210 Favorable. Can you help me understand what I am doing wrong please?
Many thanks and loving your videos so far, exam booked for 8th March!
Dan
The difference between the actual profit and the budgeted profit is not just due to the sales variance – it is also due to all the cost variances as well.
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). The actual profit will not be the actual sales at standard profit due to the sales price variance and all the cost variances.
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