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A company has recorded the following variances for a period
Sales volume variance. 10000 adverse
Sales price variance. 5000 favourable
Total cost variance. 12000 adverseStandard profit on actual sales for the period was 120000
What was the fixed budget profit for the period ???
Answer
Fixed budget profit = 120000 + 10000 = 130000
What is going on here how and why did they get that answer
I assume that you have watched my free lectures on variances, in which case you will know that the sales volume variance is the different between actual sales at standard profit, and budget sales at standard profit.
If we know the actual sales at standard profit and the sales volume variance, then we can work backwards to find the budget sales and standard profit (i.e. the budget profit).The sales price variance is of no relevant here because we are given actual sales at standard profit.
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