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Hello! Sir.
I’m so confused b/w sales quantity variance and sales volumevariance(their meaning is similar), so can can you help me, is there a lecture for that?If they only sell one product, the sales quantity variance and sales volume variance are the same thing.
The difference is only relevant when there are two or more products.
Suppose the budget to sell 500 of A and 500 of B (so 1,000 in total), and suppose the standard contribution per units for A is $5 and for B is $10.
But suppose the actually sell 550 of A and 650 of B.
Then you can calculate yourself that the total budget contribution would be 7500, and the total actual contribution would be 9250 – so a volume variance of 1750 (F).
However the reason for this is partly that they sold more units in total, but also because the changed the mix between the two.
If they had get to the same proportions then they would still have sold 50% of each. So for total sales of (550+650) 1200, it would have been 600 of each. Has this happened, then the contribution would have been 9,000. Budget was 7500, so this would give a variance of 1500 (F) – this is the sales quantity variance.
So why was the actual total not 9,000? It was because although they did sell 1,200 in total, they did not mix them 50% each – the sold more B’s (which give higher cont’n per units) and fewer A’s (which give less cont’n per unit).
50 extra B’s would give 50 x $10 = $500 extra contribution. 50 less A’s would lose 50 x $5 contribution. So the net gain is $250 (F). This is the mix variance.
So….there is a quantity variance of 1500 (F) and a mix variance of 250 (F),
The two together explain the volume variance of 1750 (F).There is no lecture on this, but there is a worked example in Chapter 14 of the Course Notes.
ok thank you so much. You deserve a salute!!
I got it. In the exam if they ask for all three( volume + mix + quantity), then I will work for volume and mix variances, then I will work the quantity variance as a balancing figure(volume var = mix + quantity) like we do for material usage variance (usage = mix + yield). Can I use this approach in the exam?More likely you would be asked for just mix and quantity, so make sure you can calculate them separately (rather than just have one as a ‘missing’ figure).
Even if you are asked for all three, the danger with letting one of them be a ‘missing’ figure is that just one sill mistake on one of them means you end up getting two of the three wrong 🙂
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