The Variances so far we learnt relate to cost of goods manufactured viz., material, labour and overheads. The purpose of variance analysis is complete unless sales variance is included in the presentation of information to management. Sales Variances are calculated by two methods viz., sales value method (or Turnover Method) and sales margin or profit method. Sales variances arise due to the changes in price and changes in sales volume. A change in value may be due to the change in quantity or a change in sales mix.
Sales variance can be understood with the help of the following chart:
To Schedule a Accounting Sales Variances tutoring session click here