REVENUE VARIANCE

Revenue Variance Example

A revenue variance analysis focuses on the difference between actual and budgeted revenue.  Fundamentally, revenue variances are due to unplanned differences in the price and the volume of units sold.  Beyond this, the sales volume variance can be broken down further to determine the impact of changes in the product mix, overall market size, and the company's market share.

BENEFITS OF A REVENUE VARIANCE ANALYSIS

A revenue variance analysis provides valuable insight into why your company fell short or exceeded revenue expectations.  This insight allows your organization to make timely adjustments in light of changing circumstances and facilitates more accurate future planning.

THE REVENUE VARIANCE ANALYSIS PROCESS

• Compile budgeted and actual price and volume information
• Compile budgeted and actual market size information
• Calculate mix and market share percentages
• Calculate the flexible budget and sales volume variances
• Break the sales volume variance down into its sales quantity and mix components
• Additionally, break the sales volume variance down into its market size and share components
• Review the results for abnormalities
• Investigate the abnormalities, if they exist

 FURTHER READING

These links elaborate on the topic at hand.  They serve as a good starting point for those companies that would like to learn more or would like to address these topics “in house.”  For those firms that prefer to continue to focus on their current responsibilities and would value the objective viewpoint of a professional from outside of the organization, click here.

Sales-Variance Analysis
Excerpt:  “Assume that English Languages Institute derives its total unit sales budget for 2003 from a management estimate of a 20% market share and a total industry sales forecast by Desert Services of 24,500 units in the region.  In 2003, Desert Services reported actual industry sales…”

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