The Price, Volume, Mix for Gross Profit for SAP B1 otherwise known as the Profit Bridge or PVM, unlocks insights into your variance from budget or from another year’s gross profits. The PVM for SAP B1 breaks down the total variance into meaningful buckets that indicate what the drivers of the increased or decreased gross profit is.
The first component of the variance is the Volume Effect. This indicates how your gross profit differed based on overall volume within the company or product line being examined. An overall volume increase will yield a positive change in overall revenue. This correlates to the activity of the company as a whole.
Sometimes when volume has increased, the overall revenue change is still negative. This may be caused by the mix of product which the company is selling. If you switch to selling more high margin products than lower margin ones then the effect will be positive. Conversely, a mix of more low margin products will have the opposite effect.
The last component of a gross profit variance is the price effect. This measure takes into account the planned price of each product versus the actual price of the product. If more discounts were given in a year than planned, then the price effect on gross profit may be a decrease. This measurement on the report will let you know how well your salespeople did at holding firm on prices.
The PVM for Gross Profit allows you to quickly and precisely drill into the contributors to the gross profit and the explanations of variances from budget or prior year. This helps managers understand what has happened and plan for changes in the coming periods.
To learn more about the Price, Volume, Mix for Gross Profit for SAP B1, check out this post which explains the PVM for revenue.
NOTE: As a requirement for this stock report, you must create two user-defined fields on the Item Master. Instructions are included with the report.