Sales Quantity Variance Formula

Sales Quantity Variance Formula

Sales Quantity Variance Formula has been shown below. Sales Quantity formula has been explained with an example.

Sales Quantity Variance= Standard Price x (Budgeted Quantity – Actual Quantity)

Sales Quantity variance shows the difference between expected quantity and actual quantity sold and such difference is reflected in standard price.

Sales Quantity Variance Formula Example

Sales Quantity= 70,000

Budgeted Sales (Quantity) = 60,000

Standard Price = 18

Solution

Sales Quantity Variance= Standard Price x (Budgeted Quantity – Actual Quantity)

= 18 x (60,000-70,000)

=18 x 10,000

= 180,000

It is important to note that sales quantity variance may be valued at standard profit or marginal profit.

Significance of Sales Quantity Variance

Sales volume and profitability has close relationship, therefore sales volume variance provides useful is a tool for management to take appropriate action for low volume of sales. (Adverse Sales Quantity Variance)

Favorable and Adverse Sales Quantity Variance

When actual sales volume is more than expected volume, then this is favorable quantity variance. When the actual sales volume is lower than standard volume of sales, then this is adverse sales quantity variance.

Reasons for Favorable Sales Quantity Variance

Reasons for favorable sales quantity variances include low sales price, seasonal demand, and change in weather condition or disaster (selling ships in flood), positive customer response to new features of product or improved quality of product.

Reasons for adverse Sales Quantity Variance

Reasons for adverse sales quantity variance includes high sales price, seasonal demand, low production due to natural disaster, entry of new competitor in the market, bad news about product in the market.

Other name of Sales Quantity Variance

Other name of sales quantity variance is sales volume variance.

 Sales Quantity Variance Formula Practice Question

Sales Quantity of Material X = 80,000

Budgeted Sales of Material X (Quantity) = 70,000

Standard Price of Material X = 20