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Hello Sir,
I understood the first 3 options. But cannot get through the fourth option.
Which of the following statements is NOT true about a sales mix variance?
Options:
A. If actual sales revenues from two products are in the same ratio as the budgeted sales
revenues there is no measurable sales mix variance – Not TrueB. If all products have the same budgeted margin there is no measurable sales mix variance-True
C. If actual sales volumes are in the same ratio as the budgeted sales volumes there is no
measurable sales mix variance-TrueD. If the actual sales volumes of all products are 10% above the budgeted sales volumes, there is no measurable sales mix variance
If the actual sales volumes of all products are 10% above the budgeted sales volumes, there is no measurable sales mix variance. Here, there is no change in the proportion of units sold, therefore there is no sales mix variance. Option D is true.
Does it mean that the 10% increase in Actual volume results in Favourable Sales volume variance and has nothing to do with sales mix. Please advise.
Option A is not true as it talks about sales revenues and not sales units. Sales mix variance is
based on the difference in sales volume as a result of changes in the proportions of each product
sold, not the sales revenue. The proportion of sales revenue can stay the same, but this can hide a change in the volume of units sold. Option A is the correct answer.Because it says like sales mix variance is caused by change in volume as a result of change in product proportion. Therefore, the fourth option states an increase in 10% actual volume. Can’t it be caused by different proportion?? This is what confuses me…
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