What Is Sales Variance and How Does It Affect the Budget?
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What is sales variance?
Sales variance refers to the difference in the revenue or profit that a business experiences when there is a difference between the actual sales units and budgeted sales units. Calculating sales variance allows the company to analyze their budget according to the profit they intended to make, and how much they actually made. By doing this, they are able to mobilize units in a way that is more beneficial for them. The business may choose to change their policies and their methods of operation so that there is a higher level of good quality production, less costs and lower losses.
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Types of sales variances
There are two types of sales variance you will come across in the sales variance assignment help that you find. These are as follows:
If the variance is unfavourable the business may choose to reconcile this difference by calculating the product of the standard price per unit. It can be done by the difference calculated between the actual and estimated sales units. This calculation is known sales volume variance, and it can be calculated via three formulas:
Sales volume variance = (actual sales – estimated sales) x standard price of units
Sales volume variance = (actual sales – estimated sales) x standard profit
Sales volume variance = (actual sales – estimated sales) x standard contribution
Sales price variance refers to the difference between the estimated price of goods that were sold and the actual price at which goods were sold. Sales are usually affected by inflation and deflation. If the standard price is lower than the actual rate at which goods are sold, this creates favourable conditions for profit. This is a rather important subtopic under standard costing and you should get the appropriate sales variance homework help when studying this.
Sales price variance can be calculated as:
Sales price variance = actual sales revenue – budgeted price
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