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The product sales budget becomes a "living document" that is useful throughout the year to all levels of management. If you are a financial manager with serious product sales budget reporting responsibilities, these two white papers and the attached spreadsheets are a "must read". The fundamental objective of this analysis is to separate "Volume" from "Mix". The combined "Volume and Mix" variance has long been considered as a single "left over" residual after all other variance analysis has been accomplished.
When viewed as a single "left over" residual, management is faced with an incomplete and often inaccurate view of gross profit results. Analysis must first start with individual products. An appropriate amount of volume and mix variance must first be calculated and assigned to each individual product. The resultant product volume and mix calculations will then be "additive" in order to reach a correct total for the group of which they are a part.
The characteristic of the number which we call the product volume variance is that it is the portion of the isolated volume variance of each product which did not have any impact on the gross profit rate of the product line - that portion of each products actual volume which did nothing to alter the gross profit rate of the product line away from its budgeted percent.
An individual product that is, if it is the only product in a group has only a volume variance an "Isolated Volume Variance".
They won't be equal because calculating variances at the summary level on a weighted average price differential isn't accurate. I'd go with a sum of the individual products. Price variance only looks at Curr Yr volumes. Share it with others Like this thread? Results 1 to 6 of 6. Thread Tools Show Printable Version.
Can anyone help me with a formula for PVM at a summary level using the example below as a starting point? I agree with your initial comment on totaling up the detailed variances for the summary. Originally Posted by JL2. All times are GMT The time now is Resources saved on this page: