Page 197 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes Sales Mix Variance (A) = ` 30 (500 – 400) = ` 3,000 (Favourable)
(B) = ` 25 (100 – 200) = ` 2,500 (Adverse)

= ` 500 (Favourable)

From the above calculations, what is obviously understood?
If the mixes are equivalent to each other, the sales volume variance is equivalent to the sales mix
variance. It means that, there would not be a sales mix variance.
Sales Sub-usage Variance:
Sales Sub-usage Variance = Standard Price (Revised Standard Quantity – Actual Quantity)
Sales Sub Usage Variance (A) = ` 30 (400 – 400) = 0
(B) = ` 25 (200 – 200) = 0

0

There is no sub-usage variance.
Verifi cation:
1. Sales Value Variance = Sales Price Variance + Sales Volume Variance
900(F) = 400(F) + 500(F)
2. Sales Volume Variance = Sales Mix Variance + Sales Sub-usage Variance
500(F) = 500(F) + 0

Solved Problems for Practice

1. Vision Ltd. furnishes the following information related to budgeted sales and actual sales
for June 1988:

Product Budgeted Actual
Qty. Price ` Qty. Price `
A 1200 15 880 18
B 800 20 880 20
C 2000 40 2640 38
Calculate the sales variance.

Note This problem shows a difference between the budgeted sales volume and actual
sales volume; which will help to understand the computation of sales mix variance and
sales sub-usage variance; through the computation of revised standard quantity.

Sales Value Variance = Actual Sales – Standard Sales
= Actual Quantity × Actual Price – Standard Quantity × Standard Price
SVV(A) = 880 × ` 18 – 1200 × ` 15 = ` 2,160 (Adverse)

SVV(B) = 880 × ` 20 – 800 × ` 20 = ` 1,600 (Favourable)
SVV(c) = 2640 × ` 38 – 2000 × ` 40 = ` 20,320 (Favourable)

Total Sales Value Variance = ` 19,760 (Favourable)

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