What is Sales Mix Variance?
Sales mix variance measures the impact on contribution margin of selling a different mix of products from what was budgeted, holding total sales volume constant. It highlights whether the actual sales mix was richer or thinner than planned.
How It Works
- Compute the budgeted average contribution per unit using the budgeted mix.
- Compute the actual contribution from the actual mix at standard margins.
- Difference x total units sold = sales mix variance.
- Investigate product-level demand and pricing dynamics.
Saudi Context
Saudi retailers with broad product portfolios use sales mix variance analysis to understand whether shifts to lower-margin private label or higher-margin imports moved the bottom line.
Example
If total volume hits budget but the mix shifts to a lower-margin product, the sales mix variance is unfavorable even if total sales units are on plan.