Sales volume is the number of units of inventory sold during an accounting period. For example, if a company sold 100 lamps per month all year, the lamp sales volume for the year is 1,200. Sales volume is used in a variety of accounting calculations, including sales volume variance, percentage of sales volume and cost volume profit analysis, to assess a company's financial performance.
TL;DR (Too Long; Didn't Read)
Calculate sales volume by adding up the quantity of items sold in a specific period.
How to Calculate Sales Volume
Sales volume is simply the quantity of goods sold in a period such as a month, quarter or year. Calculating this number is simple: you just have to record the items you sell each day and add those numbers together. For instance, if you sell 100 widgets a day, then you will sell 3000 widgets in one month and 36,000 widgets in one year. Multiplying the sales volume by the price of the product tells you how much revenue you’ve achieved from the sale of those items.
How to Calculate Sales Volume Variance
Sales volume is often used in cost accounting to identify variances from budgeted projections. To measure the
For example, say the company only expected to sell 1,100 lamps during the year, but instead sold 1,200, and the lamps sell for $15 each. The sales volume variance is 100 (1,200 less 1,100) multiplied by $15 for a variance of $1,500. Since the company sold more units than expected, this is a favorable variance. If the company had sold less than expected, it would be an unfavorable variance.
How to Calculate Percentage of Sales Volume
Sales volume can be further analyzed by considering the percentage of sales volume. Managers can use percentage of sales volume to identify the percentage of sales by channel, such as by store or sales rep. To calculate percentage of sales, divide the number of unit sales from a particular channel by the total number of units sold. For example, say 480 of the 1,200 lamps were sold in stores and the other 720 lamps were sold online. That means 40 percent of lamp sales were sold in stores and the other 60 percent of sales occurred online.
How to Run a Cost Volume Profit Analysis
A third common use for sales volume data is cost volume profit analysis, which allows managers to estimate profit levels when sales volume increases or decreases. In cost volume profit analysis, the following formula is used:
Profit = px - vx - FC
Where p equals price per unit, x is the number of units sold, v is variable cost and FC is fixed cost. For example, say a company sold 1,200 lamps priced at $15 each, variable costs were $5 per unit and fixed costs for the company are $2,000. Operating profit is 1,200 multiplied by $15 or $18,000 – minus 1,200 multiplied by $5 – $6,000 – minus fixed costs – $2,000 – for a total operating profit of $10,000. If the company wants to estimate operating profit if it sells 1,500 lamps instead of 1,200, it can simply change the number for the x variable in the formula.
Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.