Example: Western Corporation's budgeted sales for 2X11 were Actual sales for the year were: There

is a favorable sales variance of $3,700, consisting of the sales price variance and the sales volume
variance. The sales price variance equals: The sales volume variance equals:

Western Corporation's budgeted sales for 2X11 were:

Actual sales for the year were:

There is a favorable sales variance of $3,700, consisting of the sales price variance and the sales
volume variance. The sales price variance equals:

The sales volume variance equals:

The sales price variance indicates if the product is being sold at a discount or premium. Sales price
variances may be due to uncontrollable market conditions or managerial decisions. The analysis of sales
volume includes consideration of budgets, standards, sales plans, industry comparisons, and
manufacturing costs. Note that high sales volume does not automatically mean high profits. There may
be high costs associated with the products. An unfavorable sales volume variance may arise from poor
marketing or price cuts by competing companies. If the unfavorable volume variance is coupled with a
favorable price variance, the marketing manager may have lost sales by raising prices. The sales volume
variance reflects the effect on the total budgeted contribution margin that is caused by changes in the
total number of units sold. The variance can be caused by unpredictable product demand, lack of
product demand, or poor sales forecasting. An unfavorable total sales variance may signal a problem
with the marketing manager because he or she has control over sales, advertising, and often pricing.
Another possible cause of the unfavorable sales situation may be a lack of quality control, substitution of
poorer-quality components due to deficient purchasing, or deficient product design emanating from
poor engineering. The sales variances (price and volume) are prepared only for the product sales report
and the sales district report