Page 174 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Unit 8: Management Control through Variance Analysis

8.2.3 Sales Quantity Variance Notes

Budgeted price per unit of budgeted Mix (Actual Total Qty. – Budgeted Total Qty.)
It can be calculated by the differences between sales value in the flexible budget based on actual
sales volume at budgeted sales mix and that amount in the static (Master) budget based on
budgeted selling prices.
Assume the following budgeted and actual data for a particular month in the example,
Illustration:

Budgeted Actual
Jug wine Premium wine Jug wine Premium wine
` ` ` `
Selling price per unit 5 16 5.50 15.50
Sales in units 1200 400 1100 700

Solution:

Budgeted Actual
Jug wine Premium Total Jug wine Premium Total
wine wine
` ` ` ` ` `
Sales value 6000 6400 12400 6050 10850 16900
Total Sales Value Variance = Actual Sales Value – Budget Sales Value

= 16900 – 12400
= ` 4500 Favourable (F = Favourable A = Adverse)
Sales Price Variance = (Actual Unit Price – Budget Unit Price)  Actual Qty. in units

= (5.50 – 5) × 1100 + (15.50 – 16)  700
= 550 F + 350 A
= 200 F

Flexible Budget Jug wine Premium wine Total
` ` `
Selling price 5 16
Sales in units 1100 700
Sales value 5500 11200 16700

Hence, sales price variance can also be calculated by finding out the variance from flexible
budget i.e., ` 16900 – ` 16700 = ` 200 Favourable
Sales Volume Variance = Budgeted Price × Diff. Between Actual Qty. & Budgeted Quantity
= 5 (1100 – 1200) + 16 (700 – 400)
= 500 A + 4800 F
= 4300 F

Sales volume variance can also be calculated by finding out the difference between flexible
budget amounts and static (master) budget amounts =
16700 – 12400 = 4300 F

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