Page 141 - P1 Integrated Workbook STUDENT 2018

Advanced variance analysis

3.3 Benefits and problems of splitting the sales volume variance

Benefits

 The sales mix variance can allow an organisation identify trends in sales of
individual elements of its total product sales.

 The sales quantity variance can be used to indicate changes in the size of
the market and/or the change in the market share for an organisation.

 Organisations can aim to repeat any favourable variances by identifying and
exploiting their causes.

 The sales mix variance can be used to gauge the success or failure of new
marketing campaigns.

 Responsibility accounting is improved as different managers might be
responsible for different elements of sales.

Problems

 Responsibility accounting is only improved if the mix is controllable.

 The variances may be inter-dependent.

 The sales mix variance is only relevant if the products have some sort of
relationship between them.

 It can sometimes be difficult to apply these techniques in organisations which
have very broad product ranges.

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