Glossary · Finance
Price-volume-mix analysis
The breakdown of a change in revenue or margin into the effects of selling prices, quantities sold and the mix of products or customers.
- Field
- Finance
- Examined in
- CBA-FPA
- Learning objectives
- 1
Where the CBA Standards examine it
In the specimen paper
Kesteven Homes sold 128 plots in the half year against a plan of 120, and every plot was sold at its plan list price. The blended average selling price fell from GBP 250,000 planned to GBP 228,125 actual, and revenue finished GBP 0.8m below plan. The chief executive asks the sales director to explain the discounting. What should FP&A tell him?
Answer
No discount was given: more low-value units sold and fewer high-value ones
Why that is the answer
A blended average selling price is a mix statistic at least as much as a price statistic: it moves whenever the composition of what you sold changes, even when not a single price has moved. The stem tells you every plot went at its plan list price, so the whole fall from GBP 250,000 to GBP 228,125 is the shift towards cheaper house types, and the GBP 0.8m adverse revenue is a favourable volume effect more than offset by an adverse mix effect. Answering the question as asked sends the sales director to fix a pricing problem that does not exist, and leaves the real question, why the sales shape moved down the range, unasked.
Related terms
- Variance analysisFinance
The comparison of actual results with budget or forecast, explaining each difference by its cause so that management can act on it.