What does sales volume variance measure?

Sales volume variance is a key measure in management accounting that assesses the difference between expected and actual sales volume. It specifically quantifies how much of the revenue variance is attributable to selling more or fewer units than initially anticipated. This measure is essential for understanding performance against a budget or forecast, as it highlights the effects of variations in sales activity on profitability and financial results.

When actual sales exceed the expected sales volume, it indicates a favorable variance, suggesting that the business performed better than it had planned for. Conversely, if actual sales fall short of projections, it reflects an unfavorable variance, pointing to potential issues in sales strategy, market demand, or customer engagement.

This measure focuses solely on the quantity of products sold rather than other factors like pricing or cost structures, which is why it specifically compares expected sales volume against actual sales volume. Understanding this variance helps organizations make informed decisions related to sales strategy, inventory management, and overall business planning.

The other choices might touch on relevant financial data points, but they do not directly capture the essence of what sales volume variance is designed to measure. For example, profit differences based on absorption pertain to cost accounting, while sales price increases look at revenue per unit sold, and adjusting for returns deals with sales output rather than the