Bhimani, Horngren,
Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
FBV Actual
FB
SVV SB Actual quantity Actual quantity output inputs @ BP units sold @ budgeted mix @ BP
PV EV
SMV
SQV Actual market size @ budgeted market share @ budgeted price and mix. Market share variance Market size variance Note that the FBV decomposition
is based on inputs, whereas the SVV decomposition of the
SVV is based on outputs.
In addition, the decomposition of the SVV is based entirely on budgeted prices. (Differences between BP and AP create FBV.) Students find sales mix and quantity variances difficult. They tend to get lost in the detailed calculations, so it is important to go slowly. Stress the intuition. For example, the SQV arises because the total quantity of units actually sold differs from the SB. The SMV arises because the mix of individual products actually sold differs from the budgeted mix.
To capture the SQV, we hold the sales mix constant and to capture the SMV, we must hold sales quantity constant. Add perspective by emphasising the big picture.
Share with your friends: