variance analysis I Flashcards
1
Q
what is sales variances
A
show the impact on sales revenue or profit of having more or fewer sales that budgeted
2
Q
two primary reasons our actual sales revenue is different to our budgeted
A
- selling more or fewer units than budgeted
- selling the units for a higher or lower price than expected
3
Q
sales volume variance formula
A
(BQ-AQ) x BP
- BQ = budgeted sales quantity
- AQ = actual sales quantity
- BP = budgeted selling price
4
Q
sales price variance formula
A
(BP - AQ) x AQ
5
Q
when we have more than one product and we want to do analysis to get more detail on the volume variance, it may arise because of two factors:
A
- selling your products in a different ratio to what was being budgeted
- generally selling less product than expected
6
Q
what does sales mix variance compare
A
the actual quantities in their actual mix with the actual total quantity in the budgeted mix
7
Q
what does sales quantity variance measure
A
it quantifies the effect of sales revenue of selling more or fewer units but has the mix effect stripped out
8
Q
when are sales mix and quantity variance useful
A
- Product line analysis: When a company offers multiple products, sales mix variance helps identify which products are contributing to overall profitability.
Strategic decision-making: It aids in making strategic decisions about product focus, marketing efforts, and resource allocation.
Performance evaluation: Evaluating sales performance based on the contribution of each product to overall sales helps identify strengths and weaknesses in the product portfolio.
Profitability or revenue analysis: Understanding how changes in the sales mix affect profitability helps in setting pricing strategies and promotional activities.
Marketing Campaigns: Assessing the effectiveness of marketing campaigns by analysing shifts in the sales mix helps refine marketing strategies.
