Sales mix variance

The sales mix variance measures the difference in unit volumes in the actual sales mix from the planned sales mix. There is almost always a difference between planned and actual sales, so the sales mix variance is quite useful as a tool for learning about where sales varied from expectations. The following steps show how to calculate it at the individual product level:

  1. Subtract budgeted unit volume from actual unit volume and multiply by the standard contribution margin. Contribution margin is revenue minus all variable expenses.
  2. Do the same for each of the products sold.
  3. Aggregate this information to arrive at the sales mix variance for the organization.

The formula is:

(Actual unit sales – Budgeted unit sales) × Budgeted contribution margin

= Sales mix variance

For example, a company expects to sell 100 platinum harmonicas, which have a contribution margin of $12 per unit, but actually sells only 80 units. Also, the company expects to sell 400 stainless steel harmonicas, which have a contribution margin of $6, but actually sells 500 units. The sales mix variance is:

Platinum harmonica: (80 actual units – 100 budgeted units) × $12 contribution margin = -$240

Stainless steel harmonica: (500 actual units – 400 budgeted units) × $6 contribution margin = $600

Thus, the aggregated sales mix variance is $360, which reflects a large increase in the sales volume of a product having a lower contribution margin, combined with a decline in sales for a product that has a higher contribution margin.