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I am confused about Sales Variance
We have three variances
(1) Sales Price Variance = (Actual Selling Price – Budgeted Selling Price) x Actual Units
(2) Sales Volume variance = (Actual Volume – Budgeted Volume ) x Standard Margin (Contribution or Profit depends)
(3) Total Sales Variance = (Actual Selling price x Actual Units) – (Budgeted Selling Price x Budgeted Units)
Mathematically they can not be equal;
Total Variance = Price variance + Volume Variance
Please correct me if I wrote wrong. I am not confirm about third (3) total sales variance.
The sales volume variance is looking at the effect on the profit of selling more or less than budget (assuming that the selling price and the costs are all at standard).
The actual profit will be different if the selling price and the costs are not at standard, which is what the sales price variance and the cost variances are measuring.