Sales volume variance is defined as the difference between which two quantities, valued at what rate?

Sales volume variance is defined as the difference between which two quantities, valued at what rate?

• A. Difference between actual sales volume and actual revenue
• B. Difference between actual revenue and budgeted revenue
• C. Difference between budgeted sales volume and actual sales volume, valued at the standard contribution per unit
• D. Difference between budgeted revenue and actual revenue due to price changes

Answer: (C)

Sales volume variance measures the impact on contribution from selling a different number of units than planned, valuing that difference at the standard contribution per unit. In other words, it uses (actual units sold minus budgeted units) multiplied by the standard contribution per unit. If you sell more units than budgeted, you generate more contribution and the variance is favorable; if you sell fewer, the variance is unfavorable. This isolates the effect of quantity sold from price or cost changes, which are captured in separate variances.

Sales volume variance measures the impact on contribution from selling a different number of units than planned, valuing that difference at the standard contribution per unit. In other words, it uses (actual units sold minus budgeted units) multiplied by the standard contribution per unit. If you sell more units than budgeted, you generate more contribution and the variance is favorable; if you sell fewer, the variance is unfavorable. This isolates the effect of quantity sold from price or cost changes, which are captured in separate variances.