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Hello sir,
Question :
The Perseus Co a medium sized company, produces a single product in its one overseas
factory. For control purposes, a standard costing system was recently introduced.
The standards set for the month of May were as follows:
Production and sales 16,000 units
Selling price (per unit) $140
Materials:
Material 007 6 kilos per unit at $12.25 per kilo
Material XL90 3 kilos per unit at $3.20 per kilo
Labour 4.5 hours per unit at $8.40 per hour
Overheads (all fixed) $86,400 per month.
(They are not absorbed into the product costs)
The actual data for the month of May is as follows:
Produced 15,400 units which were sold at $138.25 each
Materials: Used 98,560 kilos of material 007 at a total cost of $1,256,640 and used 42,350
kilos of material XL90 at a total cost of $132,979.
Labour: Paid an actual rate of $8.65 per hour to the labour force. The total amount paid
out, amounted to $612,766.
Overheads (all fixed): $96,840
Required: Prepare a statement of the variances which reconciles the actual with the standard
profit or loss figure. (Mix and yield variances are not required.)
My question : I am not sure why didnt they included Sales volume variance while reconciling it ?
could you please help me to understand it.The question asks you to reconcile the actual profit with the standard profit (i.e. the standard profit on the actual sales).
The sales volume variance is the difference between the standard profit and the budgeted profit and so here is not needed. (Had the question asked you to reconcile the actual profit with the budget profit, then the sales volume variance would have been needed.)
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