Financial Management
Build a price and volume bridge
What you will learn
Explain a revenue variance without double counting.
Revenue variance = (actual units − budget units) × budget price + actual units × (actual price − budget price)
Choose a bridge convention and state it. Under the base-price convention, value the volume change at budget price and the price change at actual volume. Their sum equals actual revenue minus budget. Add a mix term for multiple products using an explicit base mix. A fictional retailer budgets 100 units at ₹10 and sells 90 at ₹12. Volume contributes −₹100 and price +₹180, so revenue is ₹80 above budget.
A fictional retailer budgets 100 units at ₹10 and sells 90 at ₹12. Volume contributes −₹100 and price +₹180, so revenue is ₹80 above budget.
Choose a bridge convention and state it. Under the base-price convention, value the volume change at budget price and the price change at actual volume. Their sum equals actual revenue minus budget. Add a mix term for multiple products using an explicit base mix. A fictional retailer budgets 100 units at ₹10 and sells 90 at ₹12. Volume contributes −₹100 and price +₹180, so revenue is ₹80 above budget.
Which volume multiplies the price change under this convention?