ACCA Applied Skills · Performance Management

Sales mix and quantity variances: formula sheet

Full chapter guide

Key formulas

Total sales volume variance: Σ (Actual units − Budgeted units) × Standard margin per unit; Calculate for each product and add up. Use standard profit (absorption) or standard contribution (marginal), as the question states.
Sales mix variance: Σ (Actual units − Actual total units in budget mix) × Standard margin per unit; Work product by product. Positive means more than the budget-mix share was sold, which is favourable only when multiplied by a positive margin.
Sales quantity variance: Σ (Actual total units in budget mix − Budgeted units) × Standard margin per unit; Same result as (Actual total units − Budgeted total units) × Budgeted average margin per unit.
Actual total units in budget mix: Total actual units × (Budgeted units of product ÷ Total budgeted units); This is the reference column that both variances use.
Check: Mix variance + Quantity variance = Sales volume variance; Always use this to test your answer.
Actual total in budgeted mix: Actual total units × (budgeted units of product ÷ budgeted total units); Work out this figure for every product first. The column should add up to the actual total units.
Sales mix variance (per product): (Actual units sold − Actual total in budgeted mix) × standard profit or contribution per unit; Positive result is favourable. Negative is adverse. Use standard profit for absorption costing and standard contribution for marginal costing.
Sales quantity variance (per product): (Actual total in budgeted mix − Budgeted units) × standard profit or contribution per unit; This is the companion variance. It shows the effect of selling more or fewer units in total.
Check: Sales mix variance + Sales quantity variance = Sales volume variance; Sales volume variance = (Actual units − Budgeted units) × standard profit or contribution per unit, summed over products.
Average profit method (total level): Total mix variance = Standard profit of actual units sold − (Actual total units × budgeted average profit per unit), where budgeted average profit per unit = budgeted total profit ÷ budgeted total units. Equivalently, Σ (Actual units − Actual in budget mix) × (standard profit per unit − budgeted average profit per unit); Use standard contribution instead of standard profit if the budget is on a marginal costing basis. The total equals the total of the per-product method, because the differences sum to zero, so the average profit term adds nothing. For example, in the first worked example the average profit is $14, so $17,000 − (1,100 × $14) = $1,600 favourable. Follow the method the question or examiner uses.
Budgeted average margin per unit: Total budgeted margin ÷ total budgeted units; Margin means standard profit under absorption costing or contribution under marginal costing. Use the one the question uses.
Sales quantity variance (units method): (Actual total units sold − budgeted total units) × budgeted average margin per unit; Positive is favourable, negative is adverse.
Sales quantity variance (alternative): (Actual total units at budget mix − budgeted units) × standard margin, summed over products; Gives the same answer. Useful as a cross-check.
Sales mix variance: (Actual units sold − actual total units at budget mix) × standard margin per unit, summed over products; Shows the effect of the change in mix only.
Sales volume variance: Sales mix variance + sales quantity variance = (actual units × standard margin) − budgeted margin; Use this as your check that the split adds up.
Sales mix variance: (Actual total units sold in actual mix − Actual total units sold in budgeted mix) × Standard margin per unit; Calculate it product by product, then add. Margin is usually contribution per unit, or profit per unit if the question uses absorption costing.
Sales quantity variance: (Actual total units sold in budgeted mix − Budgeted units) × Standard margin per unit; Also calculated product by product. It is favourable when total actual units exceed total budgeted units.
Sales volume variance: (Actual units − Budgeted units) × Standard margin per unit; Sales mix variance + sales quantity variance = sales volume variance. Use this as your check.
Actual units in budgeted mix: Actual total units × (Budgeted units of product ÷ Budgeted total units); This is the base figure for both variances.

Quick revision

Sales volume variance = mix variance + quantity variance.
Use standard profit per unit, or standard contribution per unit if the question uses marginal costing. Stay consistent.
Mix variance compares actual quantity sold in the actual mix with actual total quantity in the budgeted mix.
Quantity variance compares actual total quantity in the budgeted mix with budgeted quantity in the budgeted mix.
Draw the three columns before calculating anything.
Selling more of high-margin products than planned gives a favourable mix variance.
Selling more units in total than budgeted gives a favourable quantity variance, if the budgeted mix has a positive margin.
Mix variances only make sense when products are related or can be substituted. Say so in comments.
Check that your two variances add up to the total sales volume variance.
Always label variances as favourable or adverse.
Comments should give a cause and a consequence, not just repeat the number.

Common mistakes

Using actual units minus budgeted units in the mix variance. Fix: The mix variance compares actual units with actual total units in budget mix. Build that reference column first.
Using the wrong margin, such as selling price or standard cost. Fix: Use standard profit per unit for absorption costing or standard contribution per unit for marginal costing, as stated.
Comparing actual units with budgeted units instead of actual units in budget mix. Fix: Always create the 'actual total in budget mix' column first. The mix variance uses it, never the raw budget units.
Using standard contribution when the question uses absorption costing, or the reverse. Fix: Check the costing basis in the question. Use standard profit per unit under absorption costing, and standard contribution per unit under marginal costing.
Using each product's own margin instead of the budgeted average margin Fix: For the quantity variance, always divide total budgeted margin by total budgeted units and use that single average.
Using the actual average margin instead of the budgeted one Fix: The quantity variance holds the mix at budget. Use only budgeted figures for the margin.
Using selling price per unit instead of standard margin per unit in the variances. Fix: Volume, mix and quantity variances always use standard margin per unit. Price is dealt with in the sales price variance.
Saying a favourable mix variance means overall sales performance was good. Fix: Always look at quantity and price too. A favourable mix can sit beside an adverse quantity variance and total volume may be well down.

Exam tips

In an OT question, you may be asked for only one of the two variances. Work out the actual total units in budget mix first, as both need it.
Read whether the question uses profit or contribution per unit. Using the wrong one gives a wrong answer and no partial marks in an objective test.
In a written part, always say what the number means: favourable or adverse, which product drove it, and whether it was controllable.
Show a small table and the check (mix + quantity = volume). This helps you catch errors and shows method for any marks given in a constructed response.
Link the mix variance to the margins. A favourable mix means the shift was toward higher-margin products.
In OT questions you often need only one product's mix variance. Still build the budget-mix figure first, because it is the step most errors come from.
Read whether the question gives standard profit or standard contribution per unit. The method is the same, but the values differ.
In Section C, show the table with the budget-mix column. Method marks are available even if one figure is wrong.