Sales Volume is the quantity or number of goods sold or services sold in the normal operations of a company in a specified period.
Sales Volume Variance (where absorption costing is used):
= (Actual Unit Sold – Budgeted Unit Sales) x Standard Profit Per Unit
Sales Volume Variance (where marginal costing is used):
= (Actual Unit Sold – Budgeted Unit Sales) x Standard Contribution Per Unit
Sales volume is the number of units sold within a reporting period. This figure is monitored by investors to see if a business is expanding or contracting. Within a business, sales volume may be monitored at the level of the product, product line, customer, subsidiary, or sales region. This information may be used to alter the investments targeted at any of these areas.
A business may also monitor its break even sales volume, which is the number of units it must sell in order to earn a profit of zero. The concept is useful when sales are contracting, so that management can determine when it should implement cost reductions. This can be a difficult concept to employ when there are many different products, and especially when each product has a different contribution margin.
The sales volume concept can also be applied to services. For example, the sales volume of a consulting firm may be considered the total number of hours billed in a month.