Analysis of Variance - Sales Variance

Sales variance.

The analysis of variances will be complete only when the difference between the actual profit and standard profit is fully analyzed.

Profit method of calculating sales variances:

The sales variances according to this method can be analyzed as:

1. Total sales margin variance (TSMV).

Actual Profit – Budgeted Profit Or Actual Quantity Of Sales X Actual Profit Per Unit – Budgeted Quantity Of Sales X Budgeted Profit Per Unit.

2. Sales margin variance (SMV) due to volume:

It is that portion of total sales margin variance which arises due to the number of articles sold being more or less than the budgeted quantity of sales.

Standard Profit Per Unit (Actual Quantity Of Sales – Budget Quantity Of Sales)

3. Sales Margin variance (SMV) due to selling price:

It is that portion of total sales margin variance which is due to the difference between the actual price of quantity of sales affected and the standard price of those sales. It is calculated as:

(actual selling price per unit – standard selling price per unit)

Value method of calculating sales variance:

Sales variances calculated according to value method show the effect on sales value and enable the sales manager to know the effect of the various sales efforts on his overall sales value figures. Sales variances according to this method may be as follows:

1. Sales value variance (SVV):

It is the difference between the standard value and the actual value of sales affected during a period.

It is calculated as:

Sales value variance = actual value of sales – budgeted value of sales.

2. Sales price variance:

It is that portion of sales value variance which arises due to the difference between actual price and standard price specified.

The formula is:

SPV = actual quantity sold (actual price – standard price)

3. Sales volume variance (S.Vol.V):

It is that portion of the sales value variance which arises due to the difference between actual quantity of sales and standard quantity of sales.

Formula:

Sales volume variance = standard price (actual quantity of sales – budgeted quantity of sales.