Company A calculates a sales mix variance, a sales volume variance and a sales price variance. Company B only calculates a sales volume variance and a sales price variance.

Required:

1. What is the main difference between the products that A and B produce that indicates a sales mix variance should be calculated for A but not for B? Explain your answer.
2. The calculation of the sales volume variance informs an organisation that there is a difference between the actual and budgeted number of units sold. The sales volume variance can be split into two other variances which provide organisations with a greater insight into why there was a difference between actual and budgeted sales.
3. List these two variances and discuss their value to managers.
4. Discuss how the calculation of these two variances would differ for the two companies.
5. Discuss four problems that can be encountered when conducting variance analysis.