# Sales Variance

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Submitted By As3mm
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Sales Volume Variance
Definition
Sales Volume Variance is the measure of change in profit or contribution as a result of the difference between actual and budgeted sales quantity. 1. Formula
Sales Volume Variance (where absorption costing is used):
= (Actual Unit Sold - Budgeted Unit Sales) x Standard Profit Per Unit
Sales Volume Variance (where marginal costing is used):
= (Actual Unit Sold - Budgeted Unit Sales) x Standard Contribution Per Unit 2. Explanation
Sales Volume Variance quantifies the effect of a change in the level of sales on the profit or contribution over the period.
Sales volume variance differs from other volume based variances such as material usage variance and labor efficiency variance in that it calculates not just the variance in sales revenue as a result of the change in activity but it quantifies the overall change in the profit or contribution.
The nature of the sales volume variance helps in forming a more meaningful analysis of other variances in the preparation of the operating statement. For example, the material usage variance needs to take into account only the difference between the actual consumption of material and the standard consumption of material for the actual number of units sold since the sales volume variance already takes into account the variation in material cost caused by the difference between budgeted and actual sales volume.
Sales volume variance should be calculated using the standard profit per unit in case of absorption costing whereas in case of marginal costing system, standard contribution per unit is to be applied 3. Example
Wrangler Plc is a manufacturer of jeans trousers and jackets.
Information relating to Wrangler Plc's sales during the last period is as follows:

| Trousers
Units | Jackets
Units | | | | Budgeted | 12,000 | 5,000 | Actual | 10,000 | 8,000 |
Standard costs and

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