Formula For Sales Volume Variance

Sales Volume Variance

Sale book variance (also known as Sales Quantity Variance) is the difference between actual sale amount and the budget with the aforementioned standard price. It volition tell us the difference betwixt approaching and actual sale due to a change in sales quantity. The variance tin be positive or negative. Positive variance ways that the bodily sales are greater than budgeting, and then the profit is higher than expected. On the other mitt, negative variance shows that the profit is lower than expected. These assumptions only correct if the other factors such equally selling price, cost of goods sold, and other expenses remain the same.

There is always a variance betwixt the judge and actual sales, just we try to reduce information technology to the minimum level. Both favorable (positive) and unfavorable (negative) is not a expert sign to the company. If there is a large favorable variance, we volition non take enough inventory to sell, it is too expensive to produce in a short time due to labor, and raw material. A big unfavorable variance will reduce our profit. Long outstanding stock will be outdated.

So the company wishes to have a pocket-size variance only, every bit it will not bear on the whole strategies. The actual result is most the same every bit what we have planned.

Sale Volume Variance Formula

Auction Volume Variance = (Actual quantity * Standard cost) – (Budgeted quantity * Standard cost)

Example

Company A produces manufacturing Shirts and Trousers for the Usa market place. Based on their annual concern aeroplane, the company expects to auction the following quantity:

Shirt : 100,000 units @ $ xx
Trouser: 85,000 units @ $ 40

Yet, during the year, the company can but ninety,000 units of the shirt and 100,000 units of trousers.

Calculate the sale book variance

Shirt

Sale volume variance = (90,000 units * $ 20) – (100,000 units * $ 20)

= $ 200,000 unfavorable because of the visitor revenue less than expected.

Trouser

Sale volume variance = (100,000 units * $ 40) – (85,000 units * $ xl)

= $ 600,000 favorable considering of the company revenue more than expectation.

Cause of Sales Volume Variance

Favorable	Our product becomes a popular trending subsequently release to the market place. So the actual sale quantity merely increases unexpectedly.
	The product's feature bypasses the competitors' products. It took the competitors some fourth dimension to figure out.
	The price is competitive in the market. The customers are highly probable to plow to the lower products with similar quality.
	The competitors left the market; we grape the remaining market share.
Unfavorable or adverse	The actual sale quantity is less than expected due to diverse reasons such as product features, new trending, and better competitive products.
	Change in law or regulation which push button our product to the bottom.
	The production cost may increase, so it will pb to an increase in selling price. Then the sale quantity will drop equally the customers switch to substitute products.
	In a competitive market place, competitors ever release new products which try to beat us, so our product tin go down at any fourth dimension.