Page 136 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Unit 7: Variance Analysis

7.2.4 Sales Variances Notes

Sales variances is the only component accompanied the profit volume variance of the business
transaction. The sales variances are computed and analysed in order to study the effect of sales
value and facilitates the sales manager to easily understand the various sales efforts taken by the
team.
The sales variance can be classified into various categories. They are as follows:

Figure 7.5: Classification of Sales Variance

Sales Variance

Sales Value Sales Price Sales Volume Sales Mix Variance Sales Sub-usage
Variance Variance Variance Variance

Sales Values Variance

The name of the variance is self explanatory in explaining the meaning of the variance, that is
difference in between the actual value of sales and standard value of sales.
The causes/influences of sales value variance are many more and some of them highlighted for

easy understanding about overall picture.
1. The fluctuation in the selling price may lead to variance with the standard selling price —

Selling Price Variance.

2. The fluctuation in the actual volume of sales may be due to various factors, mainly the
preference of the buyers over the standard/budgeted volume of sales — Sales Volume
Variance.
3. Actual mix of various varieties may differ from the standard mix, which leads — Sales mix
variance
4. Revised standard sales quantity may be varied from the budgeted sales quantity — Sales
quantity/Sub-usage variance
Sales Value Variance = Actual Value of Sales – Standard Value of Sales
The decision criterion is that more the actual sales volume leads to greater and better the position

of the firm than the budgeted sales volume, which leads to favourable position for the fi rm and
vice versa.
Sales Price Variance

It is one of the components as well as influences of the sales variances. It is the variance in between

two different prices viz. actual price and standard price of the products.
The variance can be computed as follows:
Sales Price Variance = Actual Quantity sold (Actual Price – Standard Price)
The price variance should be finally expressed in terms of the actual number of goods sold. The

main aim of expressing them in actual quantity of goods sold is to express the variance in terms
of actual performance in units.

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