(Appendix 11A)A favourable sales volume variance for a substitute product in a multiple-product firm does NOT necessarily imply a favourable sales mix variance for that substitute product.

Question

Quizplus · Accepted Answer

A favourable sales volume variance suggests that the actual sales were higher than the budgeted sales for a particular product. However, a sales mix variance evaluates the impact of the actual sales mix on profit compared to the budgeted sales mix. Therefore, a favourable sales volume variance for a substitute product does not necessarily mean that the substitute product had a favourable sales mix variance as well. It is possible that the sales mix for the substitute product was less profitable than the budgeted sales mix even though the sales volume was higher than budgeted.

(Appendix 11A)A Favourable Sales Volume Variance for a Substitute Product