Finance Variance Analysis - Price Volume and Mix

In Corporate Finance and Managerial Accounting it's very important to be able to do finance variance analysis to understand your sales and profit. In this video we take you through how to looks at price, volume, mix, and cost to understand what is driving your financials.

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0:00 Start
0:42 Price-Volume-Mix Overview
3:32 Price
6:10 Price calculation in excel
7:31 Mix
10:26 Mix calculation in excel
12:10 Volume
13:48 Volume calculation in excel
14:33 Cost
16:03 Cost calculation in excel
16:43 Walking Price-Volume-Mix
18:35 Summary

[CorporateFinanceAcademy]

For everyone who wants the template.... head to corporatefinancecademy.com and scroll about halfway down, you will see a box that says "Get our FREE templates!", enter your email address. After you confirm your sign-up, you will receive an email with a link to download!

[elvisbello]

THIS IS THE BEST VIDEO EVER FOUND!! Thanks man! I have been around 10 hours in 2 days trying to understand more how to tell a story behind the PVM model! and of course the Profit impact you show was the chery of the cake! Great job!

[shawnmyers]

How do you calculate the volume and mix impacts with the following scenarios: (1) There is no sales (thus to avg price) in the prior year for a particular item, but sales in the current year; and (2) there is no sales of a particular item in the current year, but sales in the prior year?

[moisesvillagran]

I was recently promoted to an FP&A role and had so much trouble understanding this topic. You are amazing. I’ll definitely subscribe to your month access!

[chrisbevenour]

Thanks for the great video. Is there a slight error on the cost calculation in that it should be negative? I noticed the cost bridge doesn't walk, shouldn't the impact of increasing cost be a negative?

[nikhilgupta]

Hi... your website does not exist. Any other way to get the template ? do you have a new website ?

[nobodynobody]

Overall this is a great video tutorial to understand each component. The only thing that I want to call out is the formula written on MIX has an error.

It was shown as "CY Units * (PY product price/unit - PY total price/unit) * (CY product % of total units - PT product % of total units)"

In your excel example, your formula is actually doing this It was shown as "CY Units TOTAL * (PY product price/unit - PY total price/unit) * (CY product % of total units - PT product % of total CY Units should be written as CY Units TOTAL.

[Verum_Shashi]

Hey,
Saw the mix formula multiple times, especially between 8:45 and 9:00.

One question though, on the logic of the part of formula. It is given below. I still couldn't fully understand why we do that?


(PY Product Price/Unit) - (PY Total Price/Unit)

Why do we do this? What is we just straight away took "PY Total Price/Unit" instead? I mean anyway, we will be adjusting the mix from Volume.

So, while validating the final value; it will come the same, right?

Total Value CY - Total Value PY = Price Effect + Mix Effect + Vol. Effect.

Apologies for the trouble and taking away your time..

[tulipr]

I do product/prce volume mix analysis for work. I’ve been doing this for a year and I’m still trying to wrap my head around this concept. You made it easy to understand and this is very helpful.

Could you recommend any books or article that’ll help me further understand this concept of PVM? Thanks 😊

[freyalei]

Great video, thank you. Questions, what if it has new product or discontinued product? There will be no price impact but how to separate vol and mix?

[gileswalker]

Thanks so much for doing this. I have been struggling for a couple of days with other web content explained really badly by people, and really fast. Your content was perfectly balanced and thanks for the Excel explanation where you have shown your formulas. It gives me a fighting chance to set up my own PVM analysis. Also looping in profit was great. Love your work, cheers.

[devinmorton]

YOU ARE THE G.O.A.T!! This was extremely helpful

[assistejantandoai]

I'm stuck..

At 8:08 how do you calculate Total price/unit? Average between 25 and 10 is 17, not 14, 3.

[koyschoppe]

Thanks for the video. I am very comfortable with the MIX calculations and explaining the dilutive impacts of lower priced brands etc. What I am struggling with is how to better explain the remaining volume variance by brand. I am often left numbers that don't make much sense. I am comfortable they are right, but need help explaining to users what they (the volume variance minus mix) mean.

[ravijoshi]

Really great understanding of variance analysis ...

[anandrajiv]

Thanks a lot for the explanation! Will need to go through the formulas one at a time to really understand the logic behind all the calculations

[aracalbuto]

Is there a way to include currency (FX) effects as well in this analysis? Thanks for the great video!

[shimataka]

Great video and thank you so much ! Please allow me to ask you the same question written in below. Why does the check (column AJ) for product B on the profit side not balanced out ? I would like to implement this excel logic into our company shortly and would like to confirm if the excel formula is 100 % correct or not. If there is some formula needs to be fixed, please let me know. Thank you in advance

[RexRox-jqvq]

I do not understand 8:40 how you were able to find the total. What exactly does blended mean?

[valdemirsouza]

Just a question, if you take a look @ profit bridge of product B seems that the final results is 75 instead of 60, differently of the product A, that tie. Coud you please confirm it