Documentation
Our Method for Price Volume Mix Analysis
Price Volume Variance Analysis:
How we Calculate
The first step is easy: is the volume for a product in either scenario "zero"? If so, then all of the variance is assigned to "Volume Impact".
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The second step: calculate the area of the Orange and Blue sections in the picture below.
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For the mathematically inclined:
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Price Impact (Orange) = Change in Price x Original Volume + Half of Change in Price x Change in Original Volume
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Volume Impact (Blue) = Original Price x Change in Volume + Half of Change in Price x Change in Original Volume
What About Mix Impact?
Some textbooks will split out the "Mix Impact", which is the small green box in the picture below.
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The math: Mix Impact = Change in Price x Change in Volume
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Some analysts will combine Volume + Mix Impacts into a single number, or some other combination of factors.
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But the questions should be asked: How can we keep the analysis simple and avoid confusing mathematical minutiae? How do we prevent distracting questions from stakeholders about what exactly "Mix" means?
The fact is that the green section is frequently immaterial compared to the Price & Volume Impacts. But it is also misleading to combine it with the Volume Impact.
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That is why we distribute the Mix impact evenly between Price and Volume.
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But if a particular alternative formula is essential, Contact Us and we will consider making it a feature.
