SALES VOLUME: WHAT IS IT, HOW TO CALCULATE IT, EXAMPLES - DUDAS - 2025

The sales volume is the amount or number of products or services sold in the normal operations of a company in a specific period. This figure is monitored by investors to see if a business is expanding or contracting.

Within a company, sales volume can be monitored at the product level, as well as by product lines, customers, subsidiaries, or sales regions. This information can be used to modify investments that are directed to any of these areas.

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A company can also control its sales volume to breakeven, which is the minimum number of units it must sell in order to make a profit of zero.

The concept is useful when sales are contracting so that management can determine when cost reductions should be implemented. This can be a difficult concept to employ when there are many different products, and especially when each product has a different contribution margin.

What is the sales volume?

Sales volume is equal to the number of items that a business sells during a specified period, such as a fiscal year or quarter.

The sale, or sales income, is equal to the amount of money a business earns during the period under review.

The concepts of sales and sales volume are interconnected, because total sales are equal to sales volume multiplied by the unit price.

For example, a company sold 1 million units of a product for $ 2 each. As a result, the corporate sales volume is 1 million, generating recurring sales of $ 2 million, or 1 million multiplied by $ 2.

The concept of sales volume can also be applied to services. For example, the sales volume of a consulting firm can be considered the total number of hours billed in a month.

Gross and net sales volume

It is important to know the difference between gross and net sales volume. Gross sales volume is just the number of units sold, not taking anything else into account.

Net sales volume takes into account product returns, gifts, and other factors that can influence how many units were actually purchased by consumers.

Breakdown

Sales volume can be further broken down to analyze performance across certain individual retailers, territories, or stores. This can help optimize territory management and routing for sellers, making everyone's life easier.

Sales volume per seller can also be calculated. It can be used to distinguish the different sales volumes of sellers for different products, which is useful to take into account when evaluating their performance.

How to calculate it?

Sales volume is simply the number of products sold in a given period. Calculating this number is simple: you only have to record the items that are sold each day and add those amounts.

For example, if 100 items are sold per day, then 3,000 items will be sold in a month (100 items x 30 days) and 36,000 items in a year (3,000 items x 12 months).

By multiplying the volume of sales by the price of the product, you indicate the amount of income that has been obtained from the sale of those items.

Variation in sales volume

Sales volume is often used in cost accounting to identify variations in budgeted projections.

To measure the change in sales volume for a period, the budgeted number of units sold is subtracted from the actual number of units sold. This result is multiplied by the standard selling price of a unit.

Sales volume percentage

The percentage of sales volume can be used to identify the percentage of sales by channel, such as by stores or by sales representatives.

To calculate this, the number of unit sales for a particular channel is divided by the total number of units sold.

Sales volume to breakeven point

This indicator reveals how many units need to be sold to make a profit of zero.

It is important if the business is seeing sales drop, so that it knows when to cut back.

It can be calculated by looking at the projected expense of the company during a given time and then dividing it by the total profit obtained per unit.

For example, if a company's projected expense in a given period is $ 50,000, and it makes $ 10 per unit, then $ 50,000 / $ 10 = 5,000, which means that at least 5,000 units need to be sold to offset that expense.

Cost volume profit analysis

This analysis makes it possible to estimate profit levels when sales volume increases or decreases. In cost and profit analysis, the following formula is used:

Profit = (px - vx) - CF, where p is equal to the price per unit, x is the number of units sold, v is the variable cost, and CF is the fixed cost.

Examples

The ABC company sold 100 lamps per month throughout the year. Therefore, the volume of sales of lamps for the year is 1,200.

Variation in sales volume

Company ABC only expected to sell 1,100 lamps during the year, but instead sold 1,200 units. The lamps sell for $ 15 each.

The variation in sales volume is 100 (1,200 minus 1,100). This is multiplied by $ 15 to get a variance of $ 1,500. Since the company sold more units than expected, this is a favorable variance. If the company had sold less than expected, it would be an adverse variance.

Sales volume percentage

Suppose 480 of the 1,200 lamps were sold in stores and the other 720 were sold online. That means that 40% of the lamp sales were sold in stores and the other 60% of the sales volume was made online.

Cost volume profit analysis

The ABC company sold 1,200 lamps at a price of $ 15 each. Variable costs were $ 5 per unit and fixed costs for the company are $ 2,000.

So we have that the operating profit is 1,200 units multiplied by $ 15, which is $ 18,000, minus 1,200 times $ 5, which is $ 6,000, less fixed costs of $ 2,000, for a total operating profit of $ 10,000.

References

1. Steven Bragg (2018). Sales volume. Accounting Tools. Taken from: accountingtools.com.
2. Marquis Codjia (2019). Difference between the Sales & Sales Volume. Small Business-Chron. Taken from: smallbusiness.chron.com.
3. Madison Garcia (2018). How to Calculate Sales Volume. Taken from: bizfluent.com.
4. Melissa Sonntag (2019). How to Calculate Sales Volume and Use it to Win in the Field. Repsly. Taken from: repsly.com.
5. Xplaind (2019). Sales Volume Variance. Taken from: xplaind.com.