Calculate a direct-sales volume variance
Value the difference between actual and budgeted sales volume using the relevant standard contribution or profit per unit.
Section 4.2 · Standard costing
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. Topic 4.2 teaches standard costing, the listed material, labour, fixed-overhead and sales variances, their causes and relationships, and evidence-based business decisions. Practice is self-checked, not an official Cambridge grade. Full timed Papers 1–4 and human subject-teacher review remain outstanding.
Before you begin
- Use Topic 2.1–2.2 cost behaviour, contribution and absorption-costing ideas. In each question, identify the period, actual output, budget and standard before calculating a variance.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
What is the volume difference in a sales-volume variance?
What you will learn
- Calculate the sales-volume quantity difference
- Choose a consistent standard profit basis
- Interpret volume alongside price and costs
Value volume using the question's profit basis
For a sales-volume variance measured as a change in profit, multiply (actual units sold − budgeted units) by the standard contribution per unit under marginal costing, or by the standard profit per unit under absorption costing, as the question requires. More units create a favourable profit effect when the standard contribution/profit is positive.
Do not multiply the volume difference by selling price if the question asks for a change in profit. The standard contribution or profit captures the relevant per-unit profit basis; identify the costing method and follow the supplied information.
Sales-volume profit variance = (actual units − budgeted units) × standard contribution/profit per unit
Check the production and demand context
More units sold can improve the profit measure, but may require discounts, extra delivery costs or capacity changes. Fewer units may reflect price, competition, stock-outs, product quality or wider demand.
If actual sales differ from budget, compare price and volume effects separately and use other data to investigate. Do not assume sales mix or market conditions were constant unless the question states this.
Pause and explain
Actual sales are 900 units below budget and standard profit is $5 per unit. What is the profit direction?
Worked example
Budgeted sales are 5,000 units. Actual sales are 5,300. Standard contribution is $7 per unit. Calculate the sales-volume variance as a change in profit.
Show the worked solution
- Volume difference = 5,300 − 5,000 = 300 extra units.
- Use standard contribution of $7 per unit.
- 300 × $7 = $2,100 favourable contribution effect.
Answer $2,100 favourable sales-volume variance under the stated marginal-costing contribution basis.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Budgeted units are 2,400 and actual units are 2,550. Standard contribution is $9 per unit. Calculate the variance.
Give me a hint
Use the standard contribution because the question is on a marginal-costing basis.
Compare my reasoning
- Extra sales = 2,550 − 2,400 = 150 units.
- 150 × $9 = $1,350.
- More units at positive contribution increase the standard profit measure.
$1,350 favourable sales-volume variance.
Look for these in your work
- Quantity difference correct
- Use standard contribution
- Favourable direction correct
Under absorption costing, budgeted sales are 8,000 units, actual sales are 7,650 and standard profit is $6.40 per unit. Calculate the variance.
Give me a hint
Use standard profit per unit because the question specifies absorption costing.
Compare my reasoning
- Sales difference = 7,650 − 8,000 = 350 fewer units.
- 350 × $6.40 = $2,240.
- Fewer units reduce the standard profit measure.
$2,240 adverse sales-volume variance.
Look for these in your work
- Difference is 350 fewer units
- Use absorption standard profit
- Variance amount and direction correct
A manufacturer sells more units after a discount. What combination of information should the manager use to judge the pricing decision?
Give me a hint
Price, volume, contribution, capacity and customer response all matter.
Compare my reasoning
- Calculate the sales-price variance and sales-volume variance using a consistent standard basis.
- Assess how the lower price changed contribution and total profit, including any added selling or delivery costs.
- Consider capacity, stock availability, repeat demand and customer response before recommending the price.
Compare price and volume effects on profit, not revenue alone, then include additional costs, capacity and evidence about repeat demand.
Look for these in your work
- Separate price and volume
- Use profit/ contribution rather than price-only revenue
- Include operational and customer evidence
Common mistakes
- Using actual contribution after a price change instead of the stated standard basis
- Using selling price when asked for volume effect on profit
- Confusing units sold with units produced
What can you explain now?
For a sales-volume variance stated as a change in profit under marginal costing, what per-unit amount is used?
Compare with the explanation
Standard contribution per unit
The contribution basis measures the profit effect after standard variable cost.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
When does a sales-volume variance use standard contribution, and when should it use standard profit?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.