Price effect and volume effect

Price-volume analysis breaks the revenue variance down into two causes: volume effect = (actual quantity - budgeted quantity) x budgeted price, and price effect = (actual price - budgeted price) x actual quantity. Their sum equals the total variance, which tells you whether the variance comes from quantities sold or from prices.

Example

Budget: 100 units at €10. Actual: 110 at €11. Volume effect = +€100, price effect = +€110, variance = +€210

Related concepts

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