What is Sales Volume Variance?
Sales volume variance is the difference between actual and budgeted profit caused by a difference in sales quantity, holding selling price constant. It is computed as (actual units sold – budgeted units sold) x standard contribution margin per unit.
How It Works
- Compare actual quantity sold to budget.
- Multiply the difference by the standard contribution margin per unit.
- A positive variance means higher volume drove profit above budget.
- Investigate causes: demand changes, pricing, promotions, competitor moves.
Saudi Context
Saudi retailers use sales volume variance analysis monthly to separate the impact of footfall changes from pricing decisions.
Example
Budget 10,000 units, actual 11,000 units, standard contribution SAR 20 per unit. Sales volume variance = (11,000 – 10,000) x 20 = +SAR 20,000 favorable.