Wednesday, December 16, 2015

Calculate Volume Variance

You can determine volume variance by using a calculator.


Volume variance is a business financial term that deals with the difference between the estimated amount of units sold and the actual amount of units sold. Volume variance is also sometimes referred to as sales volume variance. Dealing with volume variance is necessary when managing the budget of a business because it allows a company to examine actual profit versus projected profit.


Instructions


1. Subtract the actual units of an item that were sold from the budgeted amount of units sold. For instance, if a company expected to sell 200 units of a product, and it only sold 180 units, you would subtract 180 from 200 to get 20.


2. Determine the profit per unit of the items being sold. The profit is the cost of the item to a consumer minus the company's cost to produce the item. For instance, if a product cost $100 in the store, and it cost the company $25 for each item produced, the profit would be $75.


3. Multiply your answer from Step 1 by your answer from Step 2 to calculate volume variance. For example, 20 times 75 equals $1,500.

Tags: amount units, amount units sold, units sold, your answer from, answer from, answer from Step