Are you looking for a way to calculate your sales volume? Do you know that just by using a simple formula, you can easily calculate your volume of sales? Here, in this article, I will give you all the information that you need to know when you are thinking of calculating sales volume.
Let’s start with the sales volume definition, and after that, we will know the sales volume formula. First, I am defining the sales volume.
What Is Sales Volume?
During a specific accounting period, the number of units that are sold is considered as sales volume. Let’s make this concept of sales volume clear with an example.
Suppose a company sold 1000 pieces of bed sheets on a monthly basis for an entire year. Now the sales volume for that particular year will be 12000.
Do not misunderstand sales volume with total sales. Total sales are the total number of units that are sold multiplied by the product’s unit cost. On the other hand, for a particular period of time, the total number of units that are sold is sales volume.
Suppose every unit of bedsheet costs $10.
Now the sales volume = the number of units sold per month x 12.
= 1000 x 12.
So, annual sales volume = 12000 units.
Total sales = 12000 x per unit cost.
= 12000 x $10.
So, the total Sales = $120000.
When we represent the total sales, we use the currency value. On the other hand, sales volume is represented as the number of units that are sold over a certain period of time.
Calculation Of Sales Volume
As I have mentioned earlier, sales volume is always measured in the number of goods that are sold for a certain period of time. So, in order to calculate the sales volume, the period of time is really an essential one.
And we can calculate sales volume for any period, like yearly, quarterly, monthly, or weekly. For calculating the sales value, we need to multiply the total number of items that are sold every day by the number of total days in a certain period.
On the other hand, we also can calculate the approximate duration with the help of sales volume. Let’s understand the calculation with an example. Suppose a company has a sales volume of 500 units in one quarter.
500/3 = 166.66, or approximately 167.
So, the sales volume is approximately 167 units monthly.
How Can We Calculate Percentage Sales Volume?
The sales channels like a store or sales representative use the percentage of sales volume in order to identify the percentage. For calculating the percentage sales volume, you need to divide the total number of units that are sold from a particular channel by the total units that are sold in its entirety.
Suppose a company has sold 1500 units of products in a certain year and one sales representative sold 100 units. Then the percentage of sales volume of that particular representative is 100/1500 = 6.7%.
So, the sales representative has generated around 6.7% of sales volume.
While dividing the area amongst the team, calculating the percentage of sales volume really helps. For field team planning, it is really essential. Just by allocating potentially equal areas for each sales representative, you will be able to optimize the entire territory.
For understanding the productivity of every representative, one critical factor is the sales volume percentage. In order to calculate the KPI of sales wraps, the sales volume percentage is really crucial. It not only empowers them but also recognizes the top performers really quickly.
For earning a profit of zero, the number of units that are required to be sold is the volume breakeven. In case your company is witnessing a slack in sales, this is really important. I will also let you know that you need to cut back the spending along with increasing the bottom line. For calculating sales volume breakeven, you need to divide the projection over a specific given time period by the total profit that is earned per unit.
Suppose a company has an expenditure of $10,000 for a given period of time. The profit per unit is $2.
So, 10,000/2 = 5000.
So, in order to get the breakeven, the company has to sell a minimum of 5,000 units.
FAQs (Frequently Asked Questions)
Here are some questions that I have been asked several times. So, when I am covering the sales volume, it will be best if I answer these questions now. It will offer you a better understanding of the topic.
1. The Sales Volume Variance Is The Difference Between The Which Two Metrics?
The difference between the actual output flexible budget and the corresponding static budget amount is the sales volume variance.
2. Which Of The Following May Cause A Favorable Sales Volume Variance Of The Revenues?
For this question, the answer is the flexible budget sales in the dollar are always more significant than the static budget sales in the dollar.
3. Sales Volume, Customer Complaints, And Output Data Are Examples Of What?
Sales volume, customer complaints, and output data are examples of objective measures.
4. A Favorable Volume Variance For Sales Revenue Would Indicate What?
A favorable volume variance for sales revenue would indicate that the actual revenue is higher than the standard revenue. Usually, it translates into higher profit.
5. The Static Budget Is Based On An Estimated Level Of Sales Volume That Was Determined At Which?
The static budget is based on an estimated level of sales volume that was determined at the beginning of an accounting period.
Now, you get an idea about the sales volume. You also can now calculate the sales volume for your company. As I have told you earlier that always remember sales volume and total sales are different. One is represented in dollars, and the other one is in numbers of sold units.