Question

This is regarding Cost Accounting. How do I calculate positive(negative) SALES MIX variance and positive(negative) PRICE Variance in respects to current and previous year's sales. The data I need to use are from actual 10-K reports from the SEC.

Answer 1

Sales mix variance is the difference between a company’s budgeted sales mix and the actual sales mix. Sales mix is the proportion of each product sold relative to total sales. Sales mix affects total company profits because some products generate higher profit margins than others. Sales mix variance includes each product line sold by the firm.

A variance is the difference between budgeted and actual amounts. Companies review sales mix variances to identify which products and product lines are performing well and which ones are not. It tells the "what" but not the "why." As a result, companies use the sales mix variance and other analytical data before making changes. For example, companies use profit margins (net income/sales) to compare the profitability of different products

Assume, for example, that a hardware store sells a $100 trimmer and a $200 lawnmower and earns $20 per unit and $30 per unit, respectively. The profit margin on the trimmer is 20% ($20/$100), while the lawnmower’s profit margin is 15% ($30/$200). Although the lawnmower has a higher sales price and generates more revenue, the trimmer earns a higher profit per dollar sold. The hardware store budgets for the units sold and the profit generated for each product the business sells.

Ie.The sales mix variance measures the difference in unit volumes in the actual sales mix from the planned sales mix. ... Subtract budgeted unit volume from actual unit volume and multiply by the standard contribution margin. Contribution margin is revenue minus all variable expenses