2/23/2020 Sales variance — AccountingTools

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May 10, 2018

Accounting Bestsellers
Accountants' Guidebook
A sales variance is the monetary difference between actual and budgeted
Accounting Controls Guidebook
sales. It is used to analyze changes in sales levels over time. There are Accounting for Casinos & Gaming
two general reasons why a sales variance can occur, which are: Accounting for Inventory
Accounting for Managers
Accounting Information Systems
The price point at which goods or services sell is different from the
Accounting Procedures Guidebook
expected price point. For example, an increased level of
Agricultural Accounting
competition forces a company to reduce its prices. This is known as Bookkeeping Guidebook
the selling price variance. Budgeting
The number of units sold varies from the expected amount. For CFO Guidebook
Closing the Books
example, a company begins selling in a new region, and expects to
Construction Accounting
sell 100,000 in its first year, but only sells 80,000 units. This is
Cost Accounting Fundamentals
known as the sales volume variance. Cost Accounting Textbook
Credit & Collections
These two reasons for a sales variance can interrelate. For example, Fixed Asset Accounting
Fraud Examination
management may decide to keep the budgeted price point throughout
GAAP Guidebook
the measurement period, despite the price being clearly higher than that
Governmental Accounting
of a competing product. The result is no sales variance due to price, but a Health Care Accounting
large negative variance due to the number of units sold being far lower Hospitality Accounting
than expected. IFRS Guidebook
Lean Accounting Guidebook
New Controller Guidebook
Management typically pays considerable attention to these components
Nonprofit Accounting
of the sales variance, in order to see if prices, product features, or Oil & Gas Accounting
marketing must be adjusted to optimize total sales and profits. Here are Payables Management
several actions that can be taken: Payroll Management
Public Company Accounting
Real Estate Accounting
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2/23/2020 Sales variance — AccountingTools

Issue a limited-time coupon offer that is effectively a price cut; this Finance Bestsellers
Business Ratios Guidebook
approach will reduce short-term profits on a per-unit basis, but
Corporate Cash Management
should increase the number of units sold.
Corporate Finance
Cut back on the number of product features and sell the product at Cost Management
a lower price point; this approach can boost volume while still Enterprise Risk Management
retaining profitability. Financial Analysis
Interpretation of Financials
Reposition advertising to show a product as high-end, which may
Investor Relations Guidebook
allow for a price boost.
MBA Guidebook
Mergers & Acquisitions
A sales variance can be caused by corporate strategy. For example, Treasurer's Guidebook
management may decide to keep prices low in order to deter potential
competitors from entering the market. If so, and the budget does not Operations Bestsellers
Constraint Management
reflect this strategy, there could be a large sales variance.
Human Resources Guidebook
Inventory Management
Related Courses New Manager Guidebook
Project Management
Cost Accounting Fundamentals Purchasing Guidebook

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