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In BPP revision kit, Block co- they have asked to calculate Total sales quantity variance they have multiplied total sales quantity variance with standard profit. But in sales mix variance they have multiplied sales mix variance with standard profit margin. why is that?
Yes it is absorption costing! Where do we use standard profit margin, average standard profit per unit and standard profit?
Thanks
They have used standard profit per unit throughout. For the sales mix variance they have used the average standard profit per unit ($9.11) which is the average of the standard profits per unit (the workings for it are in the answer).
Instead of using the average standard profit per unit when calculating the sales quantity variance, you can do it using the standard profit for each product separately (which is what I prefer to do) and you will get exactly the same answer.
I work through sales mix variances in my free lectures. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
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