Overview

This set of tools, methods and techniques will help you calculate and depict variances. A special focus is made on determining price, volume and mix effects.

If your company sells more than one product, you will at some point start wondering which products and to what extent were driving the change in total revenue or profit. This can be the change between current and prior year, or between budget and actual.

As such, the following types of analysis will come in handy:

1. See the changes at a glance using professionally designed magazine-quality charts and dashboards.

2. Compare total revenues by product and see which of them affected the revenue (profit) change to the biggest extent (both positively and negatively)

3. Price elasticity - estimate how reactive the market is to price change. Has the change in prices led to a change in volumes? Has the price increase brought in higher revenues or were they swallowed by reduced volumes? Have you been better off reducing prices this year in terms of the total change in profits?

4. Split the revenue change into three components: price effect, mix effect and volume effect. Have we done a good job pushing the volumes? Have we given enough effort to selling more expensive (profitable) products? Have we made a trade off between volumes and prices?

As a bonus, the publication explains in detail how to create a horizontal waterfall chart. This is a smart and efficient type of chart visualizing variances between the numbers. It will surely make your presentations look professional and your reports - impress your clients, managers and colleagues. This chart is compatible with all versions of Excel.

Reviews Add a review
No reviews yet

More From Andrei Okhlopkov

Browse our top rated business templates. See All
Inventory Analysis and Management
354
0
In this publication I will discuss how to analyze inventory, communicate findings of your analysis and make practical use of…
Measuring and Modelling Seasonality
613
0
Many businesses are affected by seasonal demand changes. They cause their revenues, expenses, inventory and resource requirements change through the…
Interim Budgeting (Reforecasting)
785
1
Virtually every company develops its annual budgets. The budgets are compiled before the beginning of the financial year of a…
Profit Distribution and Carried Interest Waterfall
799
1
This template describes real-world mechanisms of distributing profits between project participants. It starts with modeling a distribution to a preferred…
Descriptive statistics for grouped (weighted) data
1,234
100
Excel has a powerful set of tools to perform statistical analysis, but they apply only to ungrouped data. As an…
Dates and Timelines in Excel
2,170
207
In this post we will look at: a) Extending or shortening time schedules b) Modelling interest expense c) Planning orders,…
See All