Think of Sales Variance Analysis as your post-mortem on the sales team's performance. You budgeted ₹38,000 in profit from sales — you actually made ₹36,500. Where did the ₹1,500 go? Sales variances break that gap into clean, exam-friendly pieces.
The single most important thing to check before writing any formula: is the question using absorption costing or marginal costing? Under absorption costing, every formula uses standard profit per unit. Under marginal costing, use standard contribution per unit. The formulas look identical — only the per-unit figure changes. Miss this and you can kiss your marks goodbye.
The Total Sales Margin Variance (TSMV) = Actual Profit from Sales − Budgeted Profit. It splits into exactly two parts:
1. Sales Margin Price Variance (SMPV) — Did we sell at the right price? Formula: Actual Qty Sold × (Actual Margin − Standard Margin). The 'margin' here is selling price minus standard cost, not minus actual cost. If you accidentally use actual cost, your SMPV absorbs cost variances that don't belong there.
2. Sales Margin Volume Variance (SMVV) — Did we sell enough? Formula: Standard Margin × (Actual Qty − Budgeted Qty). This is where multi-product questions come in, because SMVV splits further into:
- Sales Mix Variance: Standard Margin × (Actual Qty in Actual Mix − Actual Qty in Revised Standard Mix). This tells you whether the team shifted toward higher-margin products.
- Sales Quantity Variance: Standard Margin × (Revised Standard Qty − Budgeted Qty). This tells you whether total market volume changed.
The Revised Standard Qty is the actual total units sold, split in the original budgeted ratio. Always calculate this in a table before touching formulas — it is the pivot of every multi-product variance question.
The tree structure to remember: TSMV = SMPV + SMVV, and SMVV = Mix Variance + Quantity Variance. A 10-mark Paper 4 question will almost always ask you to compute all four and present them in a reconciliation statement. This topic appears in nearly every attempt.