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Management Accounting · Standard Costing and Variance Analysis (Management Accounting)

Sales Variances: Turnover Method and Margin Method

Updated 10 October 2026 · Fact-checked

Sales variances explain why actual sales differ from budget. The turnover method measures the effect in sales value using standard selling prices. The margin method measures it in profit using standard margin per unit. Find the price variance first, then volume, then split volume into mix and quantity using revised standard quantity.

Understand Sales Variances: Turnover and Margin Methods

A sales budget fixes the quantity of each product you plan to sell and the standard price. Actual sales rarely match. Sales variances break the gap into causes so that management knows whether the problem was price, total quantity, or the product mix.

There are two ways to measure the gap. The turnover (value) method shows the effect on sales revenue, so every variance is multiplied by the standard selling price. The margin (profit) method shows the effect on profit, so every quantity variance is multiplied by the standard profit (margin) per unit. Price variance is the same under both methods.

The split works in layers. Sales value variance (or sales margin value variance) = price variance + volume variance. Volume variance = mix variance + quantity variance. The price variance asks: did we sell at a different price? Volume asks: did we sell a different number of units than budget?

Mix and quantity need a yardstick called revised standard quantity (RSQ). It is the total actual quantity sold, shared among products in the budgeted ratio. Quantity variance compares RSQ with budgeted quantity: it shows the effect of selling more or fewer units in total. Mix variance compares actual quantity with RSQ: it shows the effect of selling a different proportion of products. If only one product is sold, there is no mix variance.

In this page, a positive result is favourable (F) and a negative result is adverse (A). Under the margin method, the actual profit is taken as actual price less standard cost, because cost variances are studied separately.

Key rules to remember

Sales value variance (turnover)
Actual sales − Budgeted sales = (AQ × AP) − (BQ × SP)
Positive is favourable. Equals price variance + volume variance.
Sales price variance
AQ × (AP − SP)
Same under both methods. AQ is actual quantity, AP actual price, SP standard price.
Sales volume variance (turnover)
SP × (AQ − BQ)
BQ is budgeted quantity. Equals mix + quantity variance.
Sales mix variance (turnover)
SP × (AQ − RSQ)
Worked product by product, then added.
Sales quantity variance (turnover)
SP × (RSQ − BQ)
Also called sales sub-volume variance.
Revised standard quantity (RSQ)
Total actual quantity × (Budgeted quantity of the product ÷ Total budgeted quantity)
Actual total quantity in the budgeted ratio.
Sales margin value variance
Actual profit − Budgeted profit
Actual profit = AQ × (AP − standard cost). Budgeted profit = BQ × standard margin.
Sales margin volume variance
Standard margin per unit × (AQ − BQ)
Equals margin mix + margin quantity variance.
Sales margin mix variance
Standard margin per unit × (AQ − RSQ)
Use the standard margin of each product.
Sales margin quantity variance
Standard margin per unit × (RSQ − BQ)
Total-quantity effect on profit.
Link between the two methods
Margin volume variance of a product = Turnover volume variance × (Standard margin ÷ Standard price)
Holds product by product for volume, mix and quantity.

How to solve Sales Variances: Turnover and Margin Methods questions

Use this layout for any question, whichever method is asked. Set out a small table first, then calculate product by product.

  1. 1Read which method is asked: turnover (value) or margin (profit). Note the sign convention you will use: positive is favourable.
  2. 2Write the standard price, standard cost and standard margin per unit for each product, then the budgeted quantity (BQ) and actual quantity (AQ) and actual price (AP).
  3. 3Compute budgeted and actual sales value (turnover) or budgeted and actual profit (margin). The difference is the value variance.
  4. 4Compute the price variance: AQ × (AP − SP) for each product. Add the products.
  5. 5Compute the volume variance: SP (or standard margin) × (AQ − BQ) for each product. Add the products.
  6. 6Compute RSQ for each product. Then calculate mix variance on (AQ − RSQ) and quantity variance on (RSQ − BQ).
  7. 7Check your work: value = price + volume, and volume = mix + quantity. Mark each variance F or A.
  8. 8Add a one or two line comment on the cause, for example a shift to a low-margin product.

Quickest way: Check-and-shortcut method

When to use it: Use it when the paper gives several products and you have limited time. It cuts calculation and catches errors quickly.

  1. Make one table with columns: BQ, AQ, RSQ, SP, margin per unit. Fill RSQ once and use it for both mix and quantity.
  2. Do the volume variance first as SP × (AQ − BQ). Then do the quantity variance. Get mix as the balancing figure only after you have computed it directly for one product, to confirm.
  3. For the margin method, do not recompute from scratch. Multiply each product's turnover volume, mix or quantity variance by (margin ÷ price).
  4. Calculate price variance last. Then confirm that price + volume equals the value variance.
  5. If the total actual quantity equals total budgeted quantity, the quantity variance is zero and volume equals mix.

Common mistakes in Sales Variances: Turnover and Margin Methods

  • Using actual price in volume, mix or quantity variances.

    Students carry over the actual price from the price variance.

    Fix: Volume, mix and quantity use standard price (turnover) or standard margin (margin method). Only the price variance uses actual price.

  • Calculating mix variance on (AQ − BQ) instead of (AQ − RSQ).

    RSQ feels like an extra step, so it is skipped.

    Fix: Always compute RSQ first. Mix compares actual with RSQ, and quantity compares RSQ with budget.

  • Mixing up the two methods by using sales price in the margin method.

    The formula shape is the same, so only the multiplier is changed in the head.

    Fix: Write the multiplier at the top of the working: standard price for turnover, standard margin per unit for margin.

  • Taking actual profit as actual sales less actual cost in the margin method.

    Students want a complete profit figure.

    Fix: Sales variances isolate the sales effect. Use actual price less standard cost unless the question clearly asks for a different treatment.

  • Reversing the sign (favourable or adverse).

    Some books use budget minus actual for the value variance.

    Fix: Decide the rule: for sales, higher than budget is favourable. State F or A on every answer.

  • Forgetting to verify that the variances add up.

    Under time pressure, no check is done.

    Fix: Spend 30 seconds: price + volume = value, and mix + quantity = volume. A mismatch shows an arithmetic slip.

Worked examples

Example 1

Turnover method. A firm sells two products. Budget: A 400 units at ₹50, B 600 units at ₹40. Actual: A 500 units at ₹52, B 550 units at ₹38. Calculate the sales value, price, volume, mix and quantity variances.

Show the solution
  1. Budgeted sales: A 400 × 50 = ₹20,000; B 600 × 40 = ₹24,000; total ₹44,000.
  2. Actual sales: A 500 × 52 = ₹26,000; B 550 × 38 = ₹20,900; total ₹46,900.
  3. Sales value variance = 46,900 − 44,000 = ₹2,900 F.
  4. Price variance: A 500 × (52 − 50) = ₹1,000 F; B 550 × (38 − 40) = ₹1,100 A; net ₹100 A.
  5. Volume variance: A 50 × (500 − 400) = ₹5,000 F; B 40 × (550 − 600) = ₹2,000 A; net ₹3,000 F.
  6. Check: 100 A + 3,000 F = 2,900 F, which agrees with the value variance.
  7. Total actual quantity = 1,050. Budget ratio is 40:60. RSQ: A 420; B 630.
  8. Mix variance: A 50 × (500 − 420) = ₹4,000 F; B 40 × (550 − 630) = ₹3,200 A; net ₹800 F.
  9. Quantity variance: A 50 × (420 − 400) = ₹1,000 F; B 40 × (630 − 600) = ₹1,200 F; total ₹2,200 F.
  10. Check: 800 F + 2,200 F = 3,000 F, which agrees with the volume variance.

Answer: Sales value ₹2,900 F; price ₹100 A; volume ₹3,000 F; mix ₹800 F; quantity ₹2,200 F. Comment: higher volume and a shift towards the higher-priced product A outweighed a small loss from the lower selling prices.

Example 2

Margin method. Use the same quantities and prices as the previous example. Standard cost per unit is ₹35 for A and ₹30 for B. Calculate the sales margin value, price, volume, mix and quantity variances.

Show the solution
  1. Standard margin: A 50 − 35 = ₹15; B 40 − 30 = ₹10.
  2. Budgeted profit: A 400 × 15 = ₹6,000; B 600 × 10 = ₹6,000; total ₹12,000.
  3. Actual profit (actual price less standard cost): A 500 × (52 − 35) = ₹8,500; B 550 × (38 − 30) = ₹4,400; total ₹12,900.
  4. Sales margin value variance = 12,900 − 12,000 = ₹900 F.
  5. Price variance is unchanged: ₹1,000 F on A and ₹1,100 A on B; net ₹100 A.
  6. Margin volume variance: A 15 × (500 − 400) = ₹1,500 F; B 10 × (550 − 600) = ₹500 A; net ₹1,000 F.
  7. Check: 100 A + 1,000 F = 900 F, which agrees with the value variance.
  8. Using RSQ of A 420 and B 630: mix variance A 15 × (500 − 420) = ₹1,200 F; B 10 × (550 − 630) = ₹800 A; net ₹400 F.
  9. Quantity variance: A 15 × (420 − 400) = ₹300 F; B 10 × (630 − 600) = ₹300 F; total ₹600 F.
  10. Check: 400 F + 600 F = 1,000 F, which agrees with the margin volume variance.

Answer: Sales margin value ₹900 F; price ₹100 A; volume ₹1,000 F; mix ₹400 F; quantity ₹600 F. Comment: the mix moved towards A, which has the higher margin, so profit gained from mix as well as from total volume.

Exam tips

  • Write the method name and the multiplier (standard price or standard margin) at the top of your answer. Step marks follow a clear layout.
  • Show the RSQ working in a separate small table. Examiners look for it when awarding marks for mix and quantity.
  • Always show the check lines: price + volume = value and mix + quantity = volume. A check can also rescue marks if one figure is wrong.
  • Add a short interpretation of one or two lines, such as the effect of a shift to high-margin products, because numerical questions often ask for comments.
  • In MCQs, identify whether the question asks for turnover or margin, and whether it asks for volume or only mix. Wrong multipliers are the usual trap, and there is no negative marking, so always attempt every MCQ.

Practice questions from Standard Costing and Variance Analysis (Management Accounting)

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 the turnover method and the margin method?

The turnover method states each variance in sales value and uses standard selling price. The margin method states it in profit and uses standard margin per unit. Price variance is the same in both, because it depends only on actual quantity and the price difference.

What is the difference between sales mix variance and sales quantity variance?

Quantity variance shows the effect of selling more or fewer units in total, keeping the budgeted mix. Mix variance shows the effect of a different proportion of products in the actual total. Together they equal the sales volume variance.

How do I calculate revised standard quantity?

Take the total actual quantity sold and share it among the products in the budgeted ratio. For example, if actual total is 1,050 units and the budget ratio is 40:60, RSQ is 420 and 630 units.

Why is there no mix variance when only one product is sold?

With one product the budgeted proportion is always 100%, so RSQ equals actual quantity and (AQ − RSQ) is zero. The whole volume variance is then the quantity variance.