MAFundamentals defines the foundation of Management Accounting from cost concept, classification and analysis. It provides general discussion on COST, VOLUME, PROFIT, VARIANCE and other information necessary for performance measurement, decision making and pricing.

Gross Profit Variance Analysis

One technique in the analysis of Financial Statement, Gross Profit Variance Analysis is used to compare actual data (represented here by 200B) with budgeted data, standard data, previous year's data, or base year data (represented here by 200A).

Normally, these involves the Sales Variance and the Cost variance in consideration of the  price and volume or quantity factors.

Discussed here are the four (4) types.


1.) 4-WAY ANALYSIS

Sales Variance:
  • Price factor = difference in selling prices x 200B units
  • Volume or quantity factor = difference in units x 200A selling price
Cost Variance:
  • Price factor = difference in cost prices x 200B units
  • Volume or quantity factor = difference in units x 200A cost price
2.) 6-WAY ANALYSIS

Sales Variance:
  • Price factor = difference in selling prices x 200A units
  • Volume or quantity factor = difference in units x 200A selling price
  • Price-Volume factor = difference in selling prices x difference in units
Cost Variance:
  • Price factor = difference in cost prices x 200A units
  • Volume or quantity factor = difference in units x 200A cost price
  • Price-Volume  factor = difference in cost prices x difference in units
3.) 3-WAY ANALYSIS
  • Price factor = difference in selling prices x 200B units
  • Cost factor = difference in cost prices x 200B units
  • Volume or quantity factor = difference in units x 200A gross profit per unit
4.) 4-WAY ANALYSIS, PLUS - for two or more products

Sales Mix Variance:
          200B units @ 200A sales price xx
          Less 200B units @ 200A cost price xx
          Difference xx
          Less 200B units @ 200A average
          gross profit per unit		 xx
Sales Mix Variance xx

Final Sales Volume Variance:
          200B units @ 200A average
          gross profit per unit 		xx
          Less 200A gross profit xx
Final Sales Volume Variance xx