Page 245 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes The sales volume variance can be divided into two different streams that sales mix variance and
sales quantity variance/sub-usage variance.
1. Sales Mix Variance: It is the difference in between the actual sales and standard sales mix.
This variance will arise only due to change in the proportion of goods sold. This is a most
important variance usually computed/calculated, at the moment, the firm which deals
more than one commodity.
If both, the standard and actual mixes are equivalent to each other, there will not be any
mix variance in between the above mentioned.
If the mixes are totally different from each other, the sales mix variance is to be computed,
through the development of revised standard mix of quantities with reference to actual
quantities sold, then only the comparison will be meaningful to study the variances
occurred in between above mentioned. The sales mix variance is expressed in between
two different quantities and finally should be denominated in terms of standard price. The
reason for the expression in terms of standard price is the price which is totally free from
the demand and supply forces of the market.
Sales Mix Variance = Standard Price (Actual Quantity – Revised Standard Quantity)
2. Sale Sub-usage variance: It is another component of usage variance, which expresses the
deviation in between the revised standard quantity to the tune of actual quantities sold
and the early set standard quantities expected to sell.

This variance also elucidates the differences of the above mentioned only in terms of
standard price, which is the ideal indicator free from the market forces i.e free from
fluctuation.
Sales Sub-usage Variance = Standard Price (Revised Standard Quantity – Standard Quantity).

Example:

Product Budgeted Actual
Qty Price ( ) Qty Price ( )
A 400 30 500 31
B 200 25 100 24

Calculate the various types of sales variances.
Solution:

Sales value variance = Actual Sales – Standard Sales
First step is to find out the Actual Sales
Actual Sales = Actual Quantity × Actual Price
Actual Sales (A) = 500 × 31= 15,500

Actual Sales (B) = 100 × 24 = 2,400
Next step is to find out the standard quantity of sales
Standard Quantity of Sales = Standard Quantity × Standard Sales
Standard Sales (A) = 400 × 30 = 12,000

Standard Sales (B) = 200 × 25 = 5,000

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