The cost variance so for explained ultimately affects profit favourably or adversely. Budgeted profit may be affected due to increase or decrease i) in the selling price and ii) the quantum of sales.

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There are two distinct method of computing and presenting sales variance.

i)                    Sales value or turnover method and

ii)                  Sales margin profit method.

 

The first method shows the effect of variance in terms of turnover. The second shows the effect in terms of profit.

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