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A company uses standard marginal costing. Last month the standard contribution on actual sales was $10,000 and the following variances arose:
Total variable costs variance 2,000 Adverse
Sales price variance 500 Favourable
Sales volume contribution variance 1,000 Adverse
What was the actual contribution for last month?
A $7,000
B $7,500
C $8,000
D $8,500sales price=variable cost+contribution
then we could say,
sales price variance=variable cost variance+change in contribution500=2000+actual contribution-std contribution
-1500=actual contribution-10,000
actual contribution=10000-1500=8500.you wont find the above formula in ur text book.
but, this is the concept they use in text booksales price variance (F) indicates an increase . variable cost variance (A) indicates an increase.
text book method,
take standard contribution on actual sales first and then
10000
+500(f)
-2000(a)
you would get actual contribution on actual sales.if you have std contribution then add all fav variance subtract all adv variance except sales volume contribution variance, you would get actual contribution on actual sales.
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