Adnan Masruf
The analysis of the price and volume changes is a critical component in business. It allows businessmen to analyze the current year’s sales based on the previous one and also predict future sales. In this article, we will show how to do price volume variance analysis in Excel.
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Step-by-Step Procedures to Do Price Volume Variance Analysis in Excel
In this article, we will discuss price volume variance analysis in Excel in an exhaustive way. The variance in price and volume can be analyzed for the previous year and current year and also for the current year and the next year. In this article, we will discuss the current year’s price volume analysis based on the previous year.
Step 1: Calculating Total Numbers of Quantity Sold
In this step, we will calculate the number of goods sold for the current year and the previous year. We will use the SUM function to do so.
- To begin with, select the C11 cell and write down the following formula,
=SUM(C5:C10)- Then, hit Enter.
- As a result, we will have the sum of the goods sold for the previous year.
- Then, select the D11 cell and write the formula below,
=SUM(D5:D10)- Hit Enter.
- As a result, we will get the quantity sold for the current year.
Read More: How to Find Population Variance in Excel (2 Easy Ways)
Step 2: Determining Total Revenue
In price volume variance analysis, it is important to know the total revenue. Here, we will calculate the total revenue of the last year and the current year. We will use the SUM function to do it.
- Firstly, choose the E11 cell and write the following,
=SUM(E5:E10)- Then, press Enter.
- Consequently, we will get the total revenue for the past year.
- Again, select the F11 cell and write,
=SUM(F5:F10)- Finally, hit Enter to get the total revenue for this year.
Read More: How to Do Variance Analysis in Excel (With Quick Steps)
Step 3: Evaluating Revenue Per Unit
In this step, we will calculate the revenue per unit sold for a particular year. It is an important parameter to analyze the price volume variance in Excel. This is also called price.
Revenue Per Unit = Revenue of the product/ Unit sold of that product
- Choose the G5 cell and enter the following formula,
=E5/C5- Hit Enter.
- Consequently, we will have the price for the first product.
- Lower the cursor down to autofill the answers.
- After that, click on the H5 cell and type,
=F5/D5- Then, hit the Enter button.
- As a result, we will get the price for the current year.
- Finally, move the cursor down to the last cell to autofill the cells.
Read More: How to Calculate Sample Variance in Excel (2 Effective Approaches)
Step 4: Calculating Average Price
The average price of products is a crucial parameter for understanding price volume variance analysis in Excel. This is the total revenue per year divided by the total quantities sold per year.
Average Price = Total revenue/Total quantities sold
We will calculate the average price for both years.
- Firstly, select the C13 cell and enter the following,
=E11/C11- Then, hit the Enter button.
- Consequently, we will get the average price for the last year.
- Again, select the C14 cell and type,
=F11/D11- Then, hit Enter to get the average price for the current year.
Read More: Budget vs Actual Variance Formula in Excel (with Example)
Step 5: Determining Mix
Mix is the percentage of a particular good sold in total goods sold. This is formulated as quantities sold for a particular product divided by the total goods sold in that year.
Mix = (Quantities of a particular good sold/Total goods sold)*100
- To start with, choose the I5 cell and write the following,
=C5/$C$11- Press Enter.
- Consequently, we will have the mix for that year.
- Move the cursor down to the last cell to autofill.
- Repeat the same process for the current year with the formula in the J5 cell being,
=D5/$D$11
Read More: How to Calculate Variance Percentage in Excel (3 Easy Methods)
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Step 6: Calculating Mix Change
The mix change is the difference between the mix of the previous year and the current year. This is also an important parameter.
Mix Change = Mix of current year- Mix of the previous year
- Select the K5 cell and type,
=J5-I5- Then, Hit Enter.
- Consequently, we will get the differences in mix.
- Lower the cursor to autofill the cells.
Read More: How to Calculate Variance Using Pivot Table in Excel (with Easy Steps)
Step 7: Evaluating Price Variance
The price variance shows how the price of the product has changed from the previous year to the current year. If the price change is positive then the product is bringing in cash for the company otherwise the product is losing money.
Price Variance = ( Price CY – Price PY)*Quantity CY
- To start with, select the L5 cell and type the following,
=(H5-G5)*D5- Then, hit Enter.
- As a result, we will get the price variance for that product.
- Move the cursor down to the L10 cell to autofill.
- After that, select the L11 cell and enter the following,
=SUM(L5:L10)- Press the Enter button.
- Consequently, we will get the sum of the products’ price variance. It is positive that means overall the price is changed in favor of the company.
Read More: How to Calculate Variance Inflation Factor in Excel
Step 8: Determining Mix Variance
The mix variance is a bit complicated term. It shows the variance of mix of the products. Here, we need to see if the current year’s price of a particular product is greater or less than the average product of the products in two years. We also look at the mix change of that product in those two year. These two product determines if the product will have a positive mix variance , in other words favorable for the business.
Mix Variance = Revenue PY*(Price PY – Average Price PY)*Mix Change/100
- Firstly, select the N5 cell and write the following formula,
=$E$11*(G5-$C$13)*K5/100- Then, hit Enter.
- As a result, we will get the mic variance for that product.
- Move the cursor to the N10 cell to autofill the rest of the cells.
- After that, select the N11 cell and type the following,
=SUM(N5:N10)- Then, hit the Enter button.
- As a result, we will have the sum of all mix variances. It is too a positive number which means a favorable one.
Read More: Mean Variance Optimization in Excel (With Easy Steps)
Step 9: Calculating Volume Variance
The volume variance is the difference between the quantities sold multiplied by the price of the quantity from the previous year. Since we will calculate the mix variance, this will be deducted from the volume variance. The volume variance is positive means the company has sold the amount of goods this they planned last year.
Volume Variance = ( Quantity CY-Qunatity PY)*Price PY – Mix Variance
- Select the M5 cell and write,
=(D5-C5)*G5-N5- Then, press the Enter button.
- As a result, we will get the volume variance for that product.
- Then, lower the cursor down to the M10 cell to autofill the values.
- After that select the M11 cell and enter,
=SUM(M5:M10)- Then, hit Enter.
- Consequently, we will have our volume variance.
Read More: How to Calculate Semi Variance in Excel (3 Simple Methods)
Conclusion
In this article, we have talked about how to do price volume variance analysis in Excel. We did this for the previous year and the current year. It can also be done for budgeting for the next year. The procedure will be the same. In the case of previous year, we will have to consider the current year and the next year will replace the current year.
Are there any detailed explanation on the mix variance formula?
Mix Variance = Revenue PY*(Price PY – Average Price PY)*Mix Change/100
I cannot figure out why we need to divide the formula by 100.
Thanks
Hello JC, thanks for reaching out. Here, the main formula for Mix Variance is:
Mix Variance = Revenue PY*(Price PY – Average Price PY)*(% of Mix CY – % of Mix PY). Although the Mix PY and CY were shown in percentage format in the article, we didn’t calculate these values as percentage. So in the formula, the difference of Mix CY and PY is divided by 100.
Can you explain in detail for the mix variance? I cannot figure out why we have to start with budgeted sales revenue and divide the whole formula by 100.
Mix Variance = Revenue PY*(Price PY – Average Price PY)*Mix Change/100
Hello Justin, thanks for reaching out. Here, the main formula for Mix Variance is:
Mix Variance = Revenue PY*(Price PY – Average Price PY)*(% of Mix CY – % of Mix PY). Although the Mix PY and CY were shown in percentage format in the article, we didn’t calculate these values as percentage. So in the formula, the difference of Mix CY and PY is divided by 100.
Thanks for the info. It’s confusing to include the division by 100 when most readers will not understand why it’s there. I would suggest removing it when you come to review the article. Thanks again.
Thanks David for your feedback. The formatting of Mix PY, Mix CY and Mix Change being in percentage made it a bit confusing. We’ll update it soon.
Hi, thanks for this. However in the formula for the mix variance, you used QTY CY rather than Revenue PY. Is this correct or an error? Please check again and confirm. Thank you
Hello Ayodeji Aboderin, thanks for reaching out. You are right, there was an error. Now, the article is updated accordingly. Please let us know if you have any other queries.
Regards
Sajid Ahmed
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