Price-Volume-Mix Analysis
AdvancedPrice-volume-mix analysis is a method of explaining changes in revenue or profit between two periods by separating the effects of changes in selling prices, sales volumes and the mix of products sold.
When revenue changes, managers want to know why. Did prices rise, did the company sell more, or did customers shift towards more or less expensive products? Price-volume-mix analysis answers these questions.
For a simple example with one product, revenue rises from 50,000, from 1,000 units at 50, to 57,200, from 1,100 units at 52. The volume effect is 100 extra units at the old price of 50, or 5,000. The price effect is the 2 price increase on 1,100 units, or 2,200. Together, they explain the 7,200 increase.
With several products, a mix effect is added, capturing how a shift between higher-priced and lower-priced products changes revenue even if total volume and individual prices stay the same.
The analysis is widely used in management reporting, budgeting and investor presentations. Results can vary depending on the calculation method and order chosen, so the approach should be applied consistently.
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