Sales Variance:

Sales Variance:

                Variance means the difference. Every revenue collection department like the other managerial or costing department needs to analyze their periodic or annual sales variance. That is a very important term in the topic of cost accounting and variance analysis.

Definition :

The Sales variance can be define as the change in the profit or contribution as a result of difference between actual and budgeted sales quaintly.

The Sales Variance is based on the difference between actual sold units and budgeted sold units we use different formulas for absorption costing and managerial costing. The difference or variance came in sales amounts due to material usage, total sold out items variance and due to labor efficiency variance.

Favorable Sales Variance:

In the favorable sales variance the higher number of production item will be sale out as compare to the budgeted items. That is known as sales quantity variance. When the proportion  is higher for more profitable products sold than the planned and budgeted units. That is known as salesmix variance.

Unfavorable Sales Variance:

For Unfavorable sales variance the actual products not sold out as the department planned. That is known as unfavorable sales quantity volume variance.ales quantity volume variance. When the low value products sold out as compare to the high margin products that is called the unfavorable sales mix variance.   

Formula:

For Absorption Costing:

Sales Volume Variance=(Actual Sold Units – Budgeted Unit Sales) x Standard Profit Per unit.

For Contribution Costing:

Sales Volume Variance=(Actual Sold Units – Budgeted Unit Sales) x Standard Contribution Per unit.