Price Volume Mix PVM for Gross Margin Variance Analysis

Price Volume Mix calculation is very important in the financial analysis. In this video I am taking a look at the PVM calculation for Gross Margin. PVM for Gross Margin is more complicated than PVM for Revenue, however it is a lot more impactful. You can also see a quick demo of how these calculations can be implemented in Power BI.

[ghfh]

How do i do this but for the margin %? I can get the $ amounts but not % margin change

[stoneage]

for the margin bridge, might be best to split cost separately right ? its a bit confusing to put cost element inside the mix bar

[chintantrivedi]

Great explanation. Thank you. Can you please explain the formula to calculate as Percentage? for example, I am trying to build a Bridge from Prior Year GM% of 20% to Current Year GM% of 15%...I am trying to understand how to bridge that in % for Price and Rate.

[MarkySharky]

Can you explain how this would work with margin %s where the volume and price number bridge the previous periods margins to the current period. Take Geberit’s bridge in their presentation as an example

[phivoskyriakides]

Very good video! Quick question in the DAX for Perfect Price Volume Mix (PVM) Calculation Power BI Tutorial video (posted Dec 20) - you mentioned that the price impact = Volume TY * (Price TY - Price LY) but here you mention that the price impact = Volume LY * (Price TY - Price LY). Why here is different ?

[wespratt]

Thank you for the video. It was very helpful. I have built out a Gross Margin Variance analysis in Excel using your formulas. I applied the formulas to a specific category (Parts) and I get a number for the Price Impact on all Parts. I then applied the formulas to all the specific products in the Parts category. The sum of the price impact for each specific product does not tie to the result when the formula is applied to the entire category. I do not have access to Power BI. Can this be resolved in Excel?

[emilywatson]

Hi :) Thank you so much for this great course. Do you think you could explain us how you compute it with discounts and new product as show in our chart at the begining ? many thanks for sharing your knowledges

[kaym]

Hey just wanted to thank you for illustrating this calculation, it was really helpful for me.

For the final formula would it be better to add the price and cost delta impact together. Since the change in GM rate is a change in Price and Cost. So instead of price, volume, mix...it would be GM rate, volume, mix.

GM^TY - GM^LY = V^LY(Delta P - Delta C) + Delta V*(Price^LY - Cost^LY) + Delta V(Delta P - Delta C)

Instead if lumping the cost impact into mix it should be a rate impact like price.

[ronnystromberg]

Great explanation, thank you very much!!!

I work with similar product groups (only different cost/price structure/GM), divided into sub-categories further into items.

A few questions:

1. Level of granularity within the category, down to item level summarized to total category? The lower down you go in the item hierarchy, the bigger chance of hitting 0 (discontinued vs. new item) due to small variations between items. My PCVM shows completely different on mid-level and item-level.

2. Mix between the categories, is that taken into account, or is the variation only by product category summarized together? The variation between high level product groups (ex. Premium -> Basic) is crucial for the overall GM.

3. Cost impact, I would like to know how much of the GM has been affected by cost savings/increases.

My main target is to break down the GM change (increase/decrease in %-points) in to sales price change, material cost change, work cost change and mix between product groups in a easily graspable diagram

[michaelflores]

Is it possible to Quantify the price volume or mix impact to percent impact of GM%?

[gustavodesouzahochleitnerl]

Hello, ty for your video.

But I already saw the impacts calculate by another form. Instead consider Price and Volume LY, they consider TY. Like this:

Price Impact = Delta P x Vty
Volume Impact = Delta V x Pty
Mix Impact = - Delta P x Delta V


Do you know why?

And there is another way to calculate the mix imapact and volume impact that I didnt understand very well, do you know this form?

Mix impact = ((Volume Unit. TY / Volume Total TY) - (Volume Unit. LY / Volume Total lY)) x (Price Unit LY - Avarege Total Price LY) x Volume Unit TY

please help me.

[jamalbaghirov]

If we do a Gross Margin PVM in percentage terms, is it not true that we should have no volume impact?

[tatianamelnikova]

Hi, How to see the variance in percentage of gross margin?

[musafasih]

great tutorial, except that I can not use measures in my waterfall chart. Your guidance is required. Thanks.

[danielwahl]

Will you share this example power BI file as well?

[emmanuelkamara]

Hi sir, thanks for this tutorial. Kindly help me answer the questions that I posted on your blog
thanks in advance.

[PekelnikSK]

Cost should be a separate item in the GM waterfall. it should not be part of mix as shown in this video...