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Cost Accounting · Standard Costing and Variance Analysis

Sales Variances: Turnover and Margin Methods Explained

Updated 10 October 2026 · Fact-checked

Sales variances compare actual sales with budgeted sales. The turnover method measures the gap in sales value. The margin method measures the gap in profit. Price variance is (AP − BP) × AQ. Volume variance is (AQ − BQ) × BP (turnover) or × budgeted margin per unit (margin). Volume splits into mix and quantity. Tabulate, compute, then check totals.

Understand Sales Variances: Turnover and Margin Methods

A sales variance tells you why actual sales differ from the budget. The budget fixes a quantity, a selling price and, for the margin method, a profit per unit. Actual results change one or more of these. Each variance isolates one cause.

There are two ways to measure the effect. The turnover (value) method values every quantity difference at the budgeted selling price. It shows the effect on sales revenue. The margin method values quantity differences at the budgeted profit per unit (budgeted selling price minus standard cost). It shows the effect on profit. The margin method is usually more useful to management, because selling more of a low-margin product can raise turnover and still lower profit.

The price variance is the same in both methods. It asks: did we sell at a price different from the budget, on the units we actually sold? The volume variance asks: did we sell a different number of units from the budget, valued at budgeted price or margin? It is favourable when actual units exceed budgeted units.

When you sell more than one product, volume splits into two parts. The mix variance shows the effect of selling products in a different proportion from the budget. The quantity (sub-volume) variance shows the effect of selling a different total number of units, while keeping the budgeted proportion. So Volume = Mix + Quantity. For a single product, mix is always nil.

In the margin method, the sales margin variance (actual profit minus budgeted profit) equals price variance plus volume variance. This holds when profit is measured at the same standard cost in both budget and actual. In the turnover method, sales value variance equals price variance plus volume variance.

Key rules to remember

Sales Value Variance (turnover)
(AQ × AP) − (BQ × BP)
Actual sales minus budgeted sales. Favourable if actual sales are higher. AQ = actual quantity, AP = actual price, BQ = budgeted quantity, BP = budgeted price.
Sales Price Variance
(AP − BP) × AQ
Same in both methods. Favourable if actual price is higher than budgeted price.
Sales Volume Variance (turnover)
(AQ − BQ) × BP
Product by product. Favourable if actual units exceed budgeted units.
Check: turnover method
Sales Value Variance = Sales Price Variance + Sales Volume Variance
Use this to check your answer before moving on.
Revised Standard Quantity (RSQ)
RSQ of a product = Total AQ of all products × (BQ of the product ÷ Total BQ)
Actual total units spread in the budgeted proportion. Needed for mix and quantity.
Sales Mix Variance (turnover)
(AQ − RSQ) × BP
Product by product, then add. Mixed at budgeted price.
Sales Quantity Variance (turnover)
(RSQ − BQ) × BP
Equivalently (Total AQ − Total BQ) × budgeted price per unit of the budget mix. Volume = Mix + Quantity.
Budgeted margin per unit
BP − Standard cost per unit
Used in the margin method for volume, mix and quantity.
Sales Margin Variance
Actual profit − Budgeted profit
Actual profit = AQ × (AP − standard cost). Budgeted profit = BQ × (BP − standard cost).
Sales Margin Volume Variance
(AQ − BQ) × budgeted margin per unit
Price variance (AP − BP) × AQ is unchanged. Margin variance = Price + Volume.
Sales Margin Mix and Quantity Variances
Mix = (AQ − RSQ) × budgeted margin per unit; Quantity = (RSQ − BQ) × budgeted margin per unit
Margin Volume = Mix + Quantity.

How to solve Sales Variances: Turnover and Margin Methods questions

Use the same layout for any sales variance question. Decide first whether the question wants the turnover method, the margin method, or both.

  1. 1Read what is asked: value or margin method, and which variances (price, volume, mix, quantity).
  2. 2List for each product: BQ, BP, standard cost, budgeted margin per unit, AQ, AP. Work out any missing figure, such as budgeted margin.
  3. 3Compute budgeted sales and actual sales (or budgeted and actual profit for the margin method) to get the total variance.
  4. 4Compute the price variance as (AP − BP) × AQ for each product. Mark F or A.
  5. 5Compute the volume variance for each product at BP (turnover) or budgeted margin (margin method).
  6. 6If mix and quantity are needed, find total AQ, total BQ and RSQ for each product. Then compute mix = (AQ − RSQ) × rate and quantity = (RSQ − BQ) × rate.
  7. 7Add products to get totals. Check: Price + Volume = Total, and Mix + Quantity = Volume.
  8. 8Label each variance Favourable or Adverse and add one line of interpretation.

Quickest way: One table, then check the totals

When to use it: Use this for multi-product problems when time is short. It avoids recalculating the same figures.

  1. Draw one table with columns: Product, BQ, AQ, RSQ, BP, margin per unit.
  2. Fill RSQ first. If total AQ equals total BQ, RSQ equals BQ and quantity variance is nil.
  3. Use the same sign logic everywhere: for price, actual price above budget is F; for volume, mix and quantity, a quantity above the comparison base is F.
  4. For margin method, replace BP by budgeted margin per unit in volume, mix and quantity. Leave price as (AP − BP) × AQ.
  5. Get the total variance from actual minus budget. Then confirm Price + Volume equals it, and Mix + Quantity equals Volume. If a check fails, recheck RSQ.

Common mistakes in Sales Variances: Turnover and Margin Methods

  • Using actual price to value volume, mix or quantity variances.

    Students carry actual price over from the price variance.

    Fix: Quantity-type variances use budgeted price (turnover) or budgeted margin (margin method). Only the price variance uses actual price, and it is multiplied by AQ.

  • Calculating mix variance with the wrong RSQ, such as using BQ or the actual proportion.

    The revised standard quantity is a new idea and is easy to skip.

    Fix: RSQ = total actual units × budgeted proportion of that product. Check that the RSQ figures add up to total AQ.

  • Using margin per unit in the turnover method, or selling price in the margin method.

    The two methods use the same names and the same layout.

    Fix: Write the rate you are using at the top: BP for turnover, budgeted margin for margin method. Do not change it midway.

  • Using actual cost to compute actual profit in the margin method.

    Students want actual profit to match the profit and loss account.

    Fix: Sales variances isolate sales effects, so both budgeted and actual profit are measured at standard cost unless the question clearly says otherwise. Cost differences belong to cost variances.

  • Showing a mix variance for a single product, or ignoring the quantity variance.

    Students apply the multi-product layout without checking.

    Fix: With one product, mix is nil and volume is the only quantity effect. With several products, always split volume into mix and quantity if asked.

  • Wrong signs, such as marking a higher actual price as adverse.

    Sales variances work opposite to cost variances: more than budget is favourable here.

    Fix: For sales, higher price, higher units and higher profit than budget are favourable. Confirm using the check totals.

Worked examples

Example 1

A firm sells two products. Budget: A 1,000 units at ₹50 (standard cost ₹40); B 1,000 units at ₹80 (standard cost ₹60). Actual: A 1,300 units at ₹52; B 800 units at ₹78. Calculate the sales price, volume, mix and quantity variances under both the turnover and margin methods, and the total variance under each.

Show the solution
  1. Budgeted margin per unit: A = 50 − 40 = ₹10; B = 80 − 60 = ₹20.
  2. Budgeted sales = 50,000 + 80,000 = ₹1,30,000. Actual sales = 1,300 × 52 + 800 × 78 = 67,600 + 62,400 = ₹1,30,000. Sales value variance = nil.
  3. Price variance (both methods): A = (52 − 50) × 1,300 = ₹2,600 F. B = (78 − 80) × 800 = ₹1,600 A. Total = ₹1,000 F.
  4. Turnover volume: A = (1,300 − 1,000) × 50 = ₹15,000 F. B = (800 − 1,000) × 80 = ₹16,000 A. Total = ₹1,000 A. Check: 1,000 F + 1,000 A = nil.
  5. Total AQ = 2,100. Budget proportion is 50:50, so RSQ = 1,050 for each product.
  6. Turnover mix: A = (1,300 − 1,050) × 50 = ₹12,500 F. B = (800 − 1,050) × 80 = ₹20,000 A. Total = ₹7,500 A.
  7. Turnover quantity: A = (1,050 − 1,000) × 50 = ₹2,500 F. B = 50 × 80 = ₹4,000 F. Total = ₹6,500 F. Check: 7,500 A + 6,500 F = ₹1,000 A.
  8. Margin method: budgeted profit = 1,000 × 10 + 1,000 × 20 = ₹30,000. Actual profit = 1,300 × 12 + 800 × 18 = 15,600 + 14,400 = ₹30,000. Sales margin variance = nil.
  9. Margin volume: A = 300 × 10 = ₹3,000 F. B = (−200) × 20 = ₹4,000 A. Total = ₹1,000 A. Check: price 1,000 F + volume 1,000 A = nil.
  10. Margin mix: A = 250 × 10 = ₹2,500 F. B = (−250) × 20 = ₹5,000 A. Total = ₹2,500 A.
  11. Margin quantity: A = 50 × 10 = ₹500 F. B = 50 × 20 = ₹1,000 F. Total = ₹1,500 F. Check: 2,500 A + 1,500 F = ₹1,000 A.

Answer: Turnover method: Value variance nil; Price ₹1,000 F; Volume ₹1,000 A (Mix ₹7,500 A, Quantity ₹6,500 F). Margin method: Margin variance nil; Price ₹1,000 F; Volume ₹1,000 A (Mix ₹2,500 A, Quantity ₹1,500 F). Selling more of lower-margin A and less of higher-margin B hurt the mix, and the extra total units helped.

Example 2

Budget for a single product: 5,000 units at ₹120 each, standard cost ₹90 per unit. Actual: 4,600 units sold at ₹126 each. Calculate the sales value variance, price variance, volume variance, sales margin variance and the margin volume variance.

Show the solution
  1. Budgeted sales = 5,000 × 120 = ₹6,00,000. Actual sales = 4,600 × 126 = ₹5,79,600.
  2. Sales value variance = 5,79,600 − 6,00,000 = ₹20,400 A.
  3. Price variance = (126 − 120) × 4,600 = ₹27,600 F.
  4. Volume variance (turnover) = (4,600 − 5,000) × 120 = ₹48,000 A.
  5. Check: 27,600 F + 48,000 A = ₹20,400 A. This matches.
  6. Budgeted margin per unit = 120 − 90 = ₹30. Budgeted profit = 5,000 × 30 = ₹1,50,000.
  7. Actual profit at standard cost = 4,600 × (126 − 90) = 4,600 × 36 = ₹1,65,600.
  8. Sales margin variance = 1,65,600 − 1,50,000 = ₹15,600 F.
  9. Margin volume variance = (4,600 − 5,000) × 30 = ₹12,000 A.
  10. Check: 27,600 F + 12,000 A = ₹15,600 F. This matches.

Answer: Sales value variance ₹20,400 A; Price ₹27,600 F; Volume (turnover) ₹48,000 A; Sales margin variance ₹15,600 F; Margin volume ₹12,000 A. Mix is nil because there is only one product. Higher prices more than made up for lower volume in profit terms, though sales value fell.

Exam tips

  • Write the rate you use (BP or budgeted margin) and the formula before each variance. Step marks are given for the method.
  • Always show the check lines: Price + Volume = Total, and Mix + Quantity = Volume. They catch most errors quickly and show your working to the examiner.
  • Label every figure F or A. In sales variances, more than budget is favourable.
  • Read whether the question gives profit, margin or cost data. If only standard cost is given, you need it for the margin method but not for the turnover method.
  • In MCQs, check the method asked and whether the question wants the volume or the quantity variance. Do not do the full table if the answer needs only one product-wise figure.

Practice questions from Standard Costing and Variance Analysis

Sales Variances: Turnover and Margin Methods in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Sales Variances: Turnover and Margin Methods: frequently asked questions

What is the difference between sales value variance and sales margin variance?

Sales value variance is actual sales minus budgeted sales, so it shows the effect on revenue. Sales margin variance is actual profit minus budgeted profit, so it shows the effect on profit. The second is more useful when products have different margins.

How do I calculate sales mix variance and sales volume variance?

Volume variance is (AQ − BQ) × BP in the turnover method, or × budgeted margin in the margin method. For mix, first find RSQ, which is total actual units in the budgeted proportion. Then mix = (AQ − RSQ) × rate. Mix plus quantity equals volume.

Is the sales price variance the same in both methods?

Yes. It is (AP − BP) × AQ in both. Only volume, mix and quantity change, because they use selling price in one method and margin per unit in the other.

When is the sales quantity variance nil?

It is nil when total actual units equal total budgeted units, because then RSQ equals BQ for each product. In that case the whole volume variance is the mix variance.