Although this is a part of doing business it is important to understand which products are performing well, which products are not performing well, and the factors leading to the performance of both. This indicates that for the next quarter , the company can calculate sales mix forecast 10 percent of its sales will come from heat-tech running jackets and 16 percent of its sales will come from basic weight-lifting sets. But keep in mind, this number only refers to the number of units sold, not the impact of the units on revenue.

David Kindness is a Certified Public Accountant and an expert in the fields of financial accounting, corporate and individual tax planning and preparation, and investing and retirement planning. David has helped thousands of clients improve their accounting and financial systems, create budgets, and minimize their taxes. Kristen has her Bachelor of Arts in Communication with certificates in finance, marketing, and graphic design. She is a small business contributing writer for a finance website, with prior management experience at a Fortune 100 company and experience as a web producer at a news station. She’s covered a variety of topics including news, business, entrepreneurship, music, and graphic design.

Margin of Safety

It is one of the important decisions to be made for a business that sells more than one product, as it helps the management channel the resources based on the demand and profitability of the products. ProfitabilityProfitability refers to a company’s ability to generate revenue and maximize profit above its expenditure and operational costs. It is measured using specific ratios such as gross profit margin, EBITDA, and net profit margin. Through these calculations, we can see the sales of multivitamins had a positive variance, meaning the company made an additional \$606 dollars in sales of this product. For the protein powder, there was an unfavorable variance, meaning the actual cost to produce and sell the protein powder was \$138.60 greater than the expected cost. Now let’s calculate the sales mix variance for each product.

Calculating target sales both in units and in dollars requires three steps. There is a crucial impact that sales mix has on a company’s inventory cost, the impact, whether positive or negative reflects on the inventory cost that a business will incur. The total inventory costs incurred by a business also reflect on the profit margin of the company. Although you are likely to use cost-volume-profit analysis for a single product, you will more frequently use it in multi-product situations. The easiest way to use cost-volume-profit analysis for a multi-product company is to use dollars of sales as the volume measure. For CVP purposes, a multi-product company must assume a given product mix or sales mix.

Sales Volume Variance: (Definition, Formula, Example, and Analysis)

Instead of using revenue, you can use your contribution margins or your gross profit, which will make the story even more powerful. Using the profit, in particular, makes this analysis 10 times or 20 times more insightful. The sales mix report is important, because it’s used by different departments in the business to make decisions. By multiplying the 0.54 by 100, the number can be reflected as a percentage.