Chapter five measuring yield, mix and quantity effects learning Objectives



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Applied Econometrics using MATLAB, Management and Cost Accounting, case study 301.docx
Revenue and sales variances
We now examine how variances that use revenue information as a key output can be calculated. Special attention is paid to companies with multiple products or services. The revenue variances we discuss are most frequently called sales variances, in large part because sales are the single largest component of revenue for many companies. For example, sales of new or used vehicles in a motorcar dealership are typically a larger source of revenues than are after-sales revenue items such as servicing and repairs. The levels approach introduced in
Chapter 15 shows how the variances we now discuss are linked to each other:
Level Level Level Level We discuss how each variance can be calculated for the revenues of Global Air, which has multiple classes of air service on its flights. The variances in this section could be calculated for any line item in the income statement. For exposition purposes, we calculate variances for the revenue line item of Global Air. Airlines many challenges in increasing their revenues,
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Static-budget
Flexible-budget Sales volume variance
Sales-mix variance
Sales-quantity variance
Market-size
Market-share

such as the level of price discot and the special airline club promotions to use. The variances discussed in the r section help managers to evaluate how well budgeted revenue targets are met. A second reason for Global Air’s emphasis on revenues (as opposed to, say, contribution’
margin per passenger) is that variable costs per passenger are minimal. A third reason is that many marketing or sales divisions are run as revenue centres.

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