For doing sales variance analysis, we have to understand the meaning of sales variance. Sales variance or sales variance variance is the difference between actual value of sales and stand value sales. Value sales means the multiplication of sales price and quantity of sales. Following is its formula
SVV = Actual value of sales – standard value of sales.
If actual value of sales is $ 10000 and standard value of sales is $ 20000, at that time, its is unfavorable variance. It shows that our performance is less than our planning in the form of sales budget. It also tell us market conditions are not favorable for us. For knowing exact reason, we have to divide sales value variance in to two part
1. Sales price Variance
Sales price variance is the difference between actual sales price and standard sales price.
SPV = Actual Quantity of sales X ( Actual price – standard price )
For more detail of sales price variance, you can study at here.
2. Sales Volume Variance
Sales volume variance is the difference between actual quantity of sales and standard quantity of sales.
SVV = Standard price X ( Actual quantity of sales – Standard quantity of sales )
For more study of sales volume variance, you can read at here.
Sales value variance will always equal to the sales price variance and sales volume variance
Sale value variance
= Sales price variance + sales volume variance