Tracking business metrics is really important to measuring the business growth and also developing strategies as per that. After all, your strategies will set the path for the next few months of your business. And sales volume is one of the metrics.
After all, you are doing the business in order to gain some money. So, it is really crucial to calculate the sales volume and take the necessary steps for increasing it. And increasing the sales volume is not a job for a day or two.
Here I will tell you about what sales volume is and how you can calculate sales volume for your business or company. Here I will also give you some essential pieces of information that you will need in your business for better growth.
What Is Sales Volume?
Sales volume refers to the number of units that are sold over a specific period. You should not confuse sales volume with total sales, as total sales are normally quantified as a momentary value. We need to measure sales volume differently.
Let’s get an example for understanding the concept of sales volume in a better way. Suppose, on a monthly basis; a company sold 500 units of mascara for an entire year. So, the units that are sold in the particular year are 6,000.
So, for that particular company, the sales volume for that particular year is 6,000 units. Let’s assume every unit of mascara costs $10.
Now the total sales will be = 6,000 × $10 = $60,000.
So, on the other hand, the total sales of a particular period = the sales volume for the particular period × the cost of one unit.
From the above discussion, it is clear that sales volume is represented as the number of units that are sold in a particular period. On the other hand, the total sales are always represented as with the currency form.
How To Calculate Sales Volume
I have mentioned earlier that the sales volume is referred to by the total number of units sold in a specific period. So, when we calculate the sales volume, the period of time will play a crucial part.
You will be happy to know that we can calculate the sales volume for almost any period of time, such as yearly, quarterly, monthly, or even weekly. In order to calculate the sales volume, we need to multiply the total number of units sold in a single day by the total number of days in the specific period.
In case a company is selling 10 units on a daily basis for a month, then the sales volume for the entire month will be = 10 × 30 (in case the month has 30 days) = 300.
So, the total sales volume for the month is 300 units.
On the other side, we will also be able to calculate the period of time with the help of sales volume. Suppose a company has a sales volume of 120 for a quarter. Then the monthly sales volume will be = 120÷3 = 40.
So, the sales volume of the company is 40 units on a monthly basis for that particular quarter.
Sales Volume Variance
When we are gathering pieces of information about the sales volume, it will be really good if we also get the idea about sales volume variance. And now, we know the definition of sales volume, so it is time to know what sales volume variance is.
What Is Sales Volume Variance?
The difference between the projected units that are sold and the actual units that are sold is the sales volume variance. We can calculate the sales volume variance by multiplying the total number of units that are sold by the profit per unit.
Remember, you need to multiply the profit per unit, not the price per unit. Unlike the sales volume, the sales volume variance is measured as a dollar amount. Now is the time to understand the concept of sales volume variance with an example.
Suppose a company projected that it would sell 400 units in a given period, but in actuality, it managed to sell 600 units in the same given period. And the amount of profit is $10 per unit. So, the sales volume variance is (600 – 400) × $10 = 200 × $10.
So, the sales volume variance for the particular period of time would be $2000. This sales volume variance is a positive variance. In case the actual sales volume is less than the projected sales volume, the sales volume variance will be a negative variance.
Sales Revenue Vs Sales Volume
Being a part of a business, you may have heard the term sales revenue. And in case you think that both the sales revenue and sales volume are the same, then let me tell you, my reader, you are totally wrong.
Sales volume and sales revenue are totally different from each other. We know that the units that are sold in a specific period of time are sales volume. And on the other hand, the total amount of money that a company or a business earns during a particular set of times is sales revenue.
Though the definitions of sales volume and sales revenue are totally different, the calculation that you need to do in order to calculate both of these is quite similar. In order to measure sales revenue, you need to multiply sales volume by the price of a single unit.
Sales Revenue Formula
Now, you know the definition of sales revenue along with the difference of sales revenue vs sales volume. So, let’s get the formula to calculate sales revenue.
Sales revenue = sales volume × price per unit.
From this article, you get the idea about the sales volume and also how to calculate it. You need to make sure that you are not creating confusion between the sales volume, total sales, and sales revenue. In case you are having any doubt or want to know some detailed information about some other stuff, let me know. I will try to answer your queries as soon as possible.