Chapter 6: Further Variance Analysis

What is the aim of sales mix & quantity variances?

How is the standard mix calculated?

Standard mix example

What are the two ways to calculate sales mix and sales quantity variances?

Individual units method example

What is the table used to calculate sales mix variance under the individual units method? What is the standard margin under marginal costing & absorption costing?

What is the table used to calculate sales quantity variance under the individual units method?

When calculating the sales mix variance, the weighted average method is seen as being superior, why?

How is weighted average margin calculated?

How is the weighted average margin used in the sales mix variance table?

The weighted average contribution is the total budgeted contribution divided by the total budgeted sales.

To value the sales mix variance, the weighted average contribution is deducted from the standard contribution per unit for each product. This shows the difference between the contribution being generated by each product and the average contribution.

How is the sales quantity variance calculated once we have a weighted average margin per unit?

Example

Individual units method

Example

Weighted average contribution method

The weighted average contribution is the total budgeted contribution divided by the total budgeted sales.

To value the sales mix variance, the weighted average contribution is deducted from the standard contribution per unit for each product. This shows the difference between the contribution being generated by each product and the average contribution.

What are some of the benefits of splitting the sales volume variance?

What are some of the problems of splitting the sales volume variance?

What are operational and planning variances the difference between, how do they relate to manager accountability?

How do you approach calculations where there is only a change to one standard, such as standard material cost or standard material usage?

operational and planning variance example

In terms of planning variances, what are some acceptable reasons for changing standards?

What are some benefits of determining planning variances?

What are some benefits of determining planning variances?