Price-Volume-Mix (PVM) analysis is a fundamental tool in financial management and business intelligence. It allows companies to understand exactly why their revenue changed between two periods by decomposing the total variance into distinct, actionable components.

This analytical method is crucial for:

• Strategic decision-making
• Performance evaluation
• Stakeholder communication
• Budget planning and forecasting

The Core Concept

When revenue changes from one period to another, three main factors can be responsible:

1. Price Effect: Did we sell at higher or lower prices?
2. Volume Effect: Did we sell more or fewer units?
3. Mix Effect: Did we sell relatively more high-value or low-value products?

Understanding which of these factors drove the change is essential for management to make informed decisions.