Performance Management

C5: Budgeting and Control | Sales Mix and Quantity Variances (ACCA F5)

C5- Sales Mix and Quantity Variances

Sales mix and quantity variances explains how to calculate, identify and explain sales mix and quantity variances and explains the relationship between the sales volume variances and the sales mix and quantity variances.

Sales Mix and Quantity Variances

The sales volume variance consists of two variances – the sales mix variance and the sales quantity variance. They are useful “where management is in a position to control the sales mix.”

a) Calculate, identify the cause of, and explain sales mix and quantity variances.

The sales mix and sales quantity variances “are only meaningful when management can control the proportions of the products being sold.”

 Note: The sales mix variance occurs when “the proportions of the various products sold are different from those in the budget.” 

To calculate the sales mix variance:

  • Identify the total actual quantity of units sold
  • Divide the total quantity of sales into the standard mix
  • For each product, the difference between the actual quantity and the standard quantity is the mix variance
  • Apply the standard profit per unit for the material to convert the mix variance into a money value
  • The total materials mix variance is the total of the sales mix variance
 Note: The sales quantity variance shows the “difference in contribution/profit because of a change in sales volume from the budgeted volume of sales.” 

To calculate the sales quantity variance:

Calculate the total quantity of materials that should have been used for the actual number of units manufactured

  • Calculate the weighted average standard profit per unit
  • Calculate the difference between the actual total sales and the budgeted total sales
  • Convert this into a money value by applying the weighted average standard profit per unit of sale

b) Identify and explain the relationship of the sales volume variances with the sales mix and quantity variances.

The sales volume variance consists of two variances – the sales mix variance and the sales quantity variance. They are useful “where management is in a position to control the sales mix.”

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