ACCA PM Syllabus D. Budgeting And Control - Sales Mix and Quantity Variances - Notes ^{1 / 1}

Where a company sells several different products that have different profit margins, the sales volume variance can be divided into a sales quantity (sometimes called a sales yield variance) and sales mix variance.

The quantity variance measures the effect of changes in physical volume on total profits.

The mix variance measures the impact arising from the actual sales mix being different from the budgeted sales mix.

The variances can be measured either in terms of contribution margins or profit margins.

Reasons for sales mix variance

• Increased or reduced marketing efforts for a particular product

• Supply factors - supplying more or less of a product could affect the sales mix variance

• Sales team incentives on different products could also affect the sales mix variance

Reasons for sales quantity variance

• Increased or decreased demand for products

• Raw material availability

• Marketing efforts

Advantages of sales mix & quantity variances

• Allows the organisation to identify trends in demand for individual products

• Improved responsibility accounting

• Allows evaluation of marketing campaigns

• Could be used to understand changes in the market size, or an organisation’s market share

Disadvantages of sales mix & quantity variances

• The sales mix variance is only meaningful if there is a controllable relationship between demand for products

• Not always appropriate to review sales variances in isolation