Overview
Revenue variance analysis calculates the difference between actual sales and expected sales using the sales volume metrics, sales mix metrics, and the contribution margin. It is useful for comparing a company's actual sales performance vs the budgeted figure, which allows management to make the right business decision on improving its overall profitability.

### Types of Revenue Variance

There are four common types of revenue variance: 1. Flexible budget variance (FBV): the difference between actual contribution margin and standard contribution with constant sales mix and sales volume. 2. Sales mix variance (SMV): the difference between the actual product mix and standard product mix with constant sales volume and contribution margin. 3. Sales quantity variance (SQV): the difference between the actual sales volume and standard sales volume with constant sales mix and contribution margin. 4. Sales volume variance (SVV): Sales mix variance + Sales quantity variance   This Excel template uses the column-based approach to calculate the different types of revenue variance. A positive variance is considered favorable to the company, while a negative variance is unfavorable. In expressing the revenue variances, companies would use "favorable" or "unfavorable" instead of positive or negative signs to indicate that. For example, the sales quantity variance is \$5,000 unfavorable when the calculation results in -\$5,000. When sales quantity variance is +\$3,000, it is said to be \$3,000 favorable.

### Why is Revenue Variance Analysis Important?

Revenue variance analysis is a critical for any company because it provides management information that might not be easily seen from sales records. Analyzing the costs, sales, and contribution margin helps companies better measure how effective the production methods are. It also helps comparing between the performance of different products.

Read CFI's complete guide on revenue variance to have a better grasp of the concept and application in real life. Or check out all accounting templates on CFI Marketplace for other useful accounting and finance tools!
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