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Dear John,
I hope that you are fine. Can you please explain to me the relevancy of the sales quantity variance. But what is the difference between the ” sales volumes” and “Sales Quantity” in this context?
I know sales quantity variance and Sales mix variance are sub analysis of the sales volume variance but I still have a missing link at some point.
Thanks
Let me try and explain with a little example.
Suppose we budgeted on selling 10000 units of Product A with a standard profit of $1 per unit, and also 10000 units of product B with a standard profit of $10 per unit.
If we actually sold 30000 units – 15000 of each – then obviously we would make more profit. However, if it was 30000 in total, but was 29000 of A and only 1000 of B, then obviously that would not be very good.
Quantity and mix variances separate out the two effects – with quantity we see how much profit is affected by selling more or less in total, with the same mix (50% of each in my little example). Mix variance calculates how much the profit is affected by selling more of one product and less of the other.
Thank for the response,
Sorry for my delayed reply, However my question was basically the difference between sales qty and sales volume.
Thanks
I understood your question, and that was what I was answering.
Again, sales volume just looks at the effect of selling different than what was budgeted.
Sales quantity is looking at the total level of sales, and sales mix is looking at how those total sales were split between the different product.
Dear John,
what I know is that the difference between sales volume variance and sales quantity variance is that the former is calculated using the actual sales volume whereas the latter is calculated using the sales volume of products in the proportion of standard mix.I wonder what would happen if I was dealing with only one product where the issue of mixes does not come into play. Don’t we get the difference between budget and actual in both cases AND value this difference by Standard profit or contribution?
If there is only one product then there is only the sales volume variance (the difference between budget and actual, at standard profit or contribution).
You could not then be asked to analyse it because it would be pointless – the mix variance would obviously be zero, and the quantity variance would be the same as the volume variance.
hahahaha,
Thank you in fact now I understand,that what makes these two different is the Mix.
Thanks
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