Sales mix variance
In one sentenceThe effect on profit of the proportions of items sold differing from the estimated proportions, with total quantity sold held constant, because the items have different margins.
Simply put
You may sell exactly the total number you planned and still see profit fall. The reason is that customers bought more of the lower-margin item than you expected.
It is calculated for each item: the difference between its actual quantity and its quantity had it sold at its estimated share of the actual total, multiplied by its standard contribution margin; then the results are added up.
Worked example
A restaurant estimated selling 1,000 meals: 60% large meals at a margin of 30 SAR and 40% small meals at a margin of 10 SAR. It actually sold 1,000 meals: 500 large and 500 small.
Large: (500 − 1,000 × 60%) × 30(500 − 600) × 30 = −3,000
Small: (500 − 1,000 × 40%) × 10(500 − 400) × 10 = +1,000
Total−3,000 + 1,000 = −2,000
Sales mix variance2,000 SAR unfavorable
Formula: For each item: (Actual quantity − Total actual quantity × Item's estimated share) × Item's standard contribution margin
Don't confuse it with
Sales volume varianceIt measures the change in the total number sold, while the mix measures the change in how it is distributed among items.