Sales Mix Variance


Sales Mix Variance measures the change in profit or contribution attributable to the variation in the proportion of the different products from the standard mix.


Sales Mix Variance (where standard costing is used):

= (Actual Unit Sold – Unit Sales at Standard Mix) x Standard Profit Per Unit

Sales Mix Variance (where marginal costing is used):

= (Actual Unit Sold – Unit Sales at Standard Mix) x Standard Contribution Per Unit


Sales Mix Variance is one of the two sub-variances of sales volume variance (the other being sales quantity variance). Sales mix variance quantifies the effect of the variation in the proportion of different products sold during a period from the standard mix determined in the budget-setting process.

Sales mix variance, as with sales volume variance, should be calculated using the standard profit per unit in case of absorption costing and standard contribution per unit in case of marginal costing system.


Aliengear Inc. is a small company that specializes in the manufacture and sale of gaming computers. Currently, the company offers two models of gaming PCs:

  • Turbox – A professional gaming PC with a water-cooling system priced at $2,500
  • Speedo – An entry level gaming PC with standard fan cooling priced at $1,000

Aliengear budgeted sales of 1,600 units of Turbox and 2,400 units of Speedo in the last year. The standard variable costs of a single unit of Turbox and Speedo were set at $1,500 and $750 respectively.

The sales team at Aliengear managed to sell 1,300 units of Turbox and 3,700 units of Speedo during the last year.

Calculate the sales mix variance.

Step 1: Calculate the standard mix ratio

Standard mix ratio:  

40% Turbox* and 60% Speedo**

*  1,600 / (1,600 + 2,400) % = 40% Turbox

** 100% – 40% = 60% Speedo

Step 2: Calculate the sales quantities in proportion to the standard mix

Total sales during the period: 1,300 Turbox + 3,700 Speedo = 5,000 units

Unit Sales at Standard Mix:

Sales of Turbox in standard mix @ 40% of 5,000 = 2,000 units

Sales of Speedo in standard mix @ 60% of 5,000 = 3,000 units

Step 3: Calculate the difference between actual sales quantities and the sales quantities in standard mix

Turbox Units Speedo Units

Actual sales quantities (as per question)



Unit sales at standard mix (Step 2)








Step 4: Calculate the standard contribution per unit

Turbox $ Speedo $




Variable cost



Standard contribution per unit



Step 5: Calculate the variance for each product

Turbox Speedo

Standard contribution per unit (Step 4)



Actual quantity - Standard mix (Step 3)

x (700 units)

x 700 units






Step 6: Add the individual variances

Sales Mix Variance


($700,000 - $175,000)


$525,000 Adverse

Sales mix variance is adverse in this example because a lower proportion (i.e. 26%) of Turbox (which is more profitable than Speedo) were sold during the year as compared to the standard mix (i.e. 40%).


Sales mix variance is only a relative measure of the variation in performance of an organization and should be interpreted with care. For instance, an adverse sales mix variance may be perfectly fine where a company is able to earn extra revenue through sale of lower margin products if such sales are in addition to high sales of the products with higher margins.

Favorable sales mix variance suggests that a higher proportion of more profitable products were sold during the period than was anticipated in the budget.

Reasons for favorable sales mix variance may include:

  • Concentration of sales and marketing efforts towards selling the more profitable products.
  • Increase in the demand for the higher margin products (where demand is a limiting factor).
  • Increase in the supply of the more profitable products due to for example addition to the production capacity (where supply is a limiting factor).
  • Decrease in the demand or supply of the less profitable products.

Adverse sale mix variance suggests that a higher proportion of the low margin products were sold during the period than expected in the budget.

Reasons for adverse sales mix variance may include:

  • Demand for the more profitable products being lower than anticipated.
  • Decrease in the production of the high margin products due to supply side limiting factors (e.g. shortage of raw materials or labor).
  • Sales team not focusing on selling products with higher margins due to for example lack of awareness or misaligned performance incentives (e.g. uniform sales commission on the entire product range may not motivate sales staff to compete for high margin sales).
  • Increase in demand or supply of the less profitable products.

Share This Post

Share on facebook
Share on twitter
Share on linkedin
Share on print
Scroll to Top