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Word Count: 404
Since variances are merely mathematical formula they can be applied to any situation where there is a standard of performance to be compared with an actual one This includes sales and margins In the same way that costs can be broken down into material Labour and overheads with price rate and efficiency variances so the sales results as they differ from a standard or budget can be analysed The principals are exactly the same for calculating 8226Sales margin price variance 8226Sales margin quantity variance 8226Sales margin mix variance 8226Sales margin volume variance In all these the standard sales margin is the standard selling price minus the standard cost If marginal costing is used then the phrase sales margin is simply replaced by sales contribution As I have some knowledge of the inside track on pharmaceutical sales Drug companies still consider outsourcing to be a tactical rather than a strategic move Decisions are price driven and done on a product-by-product basis 1 This stance has been fostered in the pharmaceutical industry by historically high profit margins Gross margins price received minus cost of goods--typically have been 80 Every sales dollar lost because of a supply interruption means 80 cents off the bottom line for this reason pharmas principal consideration in manufacturing has not been cost but security of supply In most other industries cost is often part of the competitive environment and manufacturing efficiency is important 1 Sales knowledge is a valuable source of competitiveness Because of increasingly complex products and growing importance of product launches efficient sales training is beneficial to many companies Standard costs are predetermined costs that should be achieved under predetermined conditions Their usefulness encompasses Planning building blocks for budgeting eg materials specifications standards use in calculating the materials purchasing budget and standard labour timesmachine usage in preparing labour budgets and production plans Control and performance measurement benchmark for comparison with actual performance Decision
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