Chapter 108
Sales Volume Variance

Measurement Need

To measure the impact from volume changes.

Solutioni

Sales volume variance is calculated by:

SVVt=SQVt+SMVt

Where

SVV = sales volume variance in time period t

SQVt = sales quantity variance in time period t

SMVt = sales mix variance in time period t

To solve, the marketer first needs to solve for SQV and SMV. These are calculated as follows:

SQVt=PPPSt−EPASt

Where

SQVt = sales quantity variance in time period t

PPPSt = projected profit based on projected sales in time period t

EPASt = expected profit from actual sales in time period t*

*Note: This is calculated as though profit increases or decreases proportionally with changes in the level of salesii

SMVt=EPASt−PPASt

Where

SMVt = sales mix variance in time period t

EPASt = expected profit from actual sales in time period t

PPASt = projected profit from actual sales in time period t**

**Note: The sum of projected profit from all units soldiii

Returning to Glob Toys from Chapter 43, we can now compute the results:

SQVt=$400,000−($990,000÷$1,000,000×$400,000)            =$4,000SMVt=$400,000−($990,000÷$1,000,000×$400,000)            =$40,000

Solving for the sales volume variance:

SVVt=$4,000+(−$40,000)            =$36,000

Total sales variance

Using the results from Chapter 43, the marketer can now calculate their total sales variance:

TSVt=SPVt+SVVt            =−$190,000+(−$36,000)            =−$226,000

Impact

Chapter 107 discussed sales price variance, which helps marketers understand how price changes impact actual sales. Volume changes also have an important impact, and this needs to be measured. Several factors affect sales volume variance:

  1. Customer needs changed resulting in an increase/decrease in quantity ordered
  2. Unexpected cost increases forced an increase in price during time period t
  3. Competitors introduced a new product that attracted customers away
  4. Production delays forced competitors to cancel commitments

The implications differ for each of these factors and marketers will need to adjust their plans accordingly to ensure their products perform closer to expectations.

iC. Gilligan, and R. M. S. Wilson, Strategic Marketing Management: Planning, Implementation & Control (2005), 781–783; Accounting Explained, Sales Volume Variance, 2011–2013. Retrieved June 3, 2017 from http://accountingexplained.com/managerial/standard-costing/sales-volume-variance

iiIbid.

iiiIbid.

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