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Hi Sir Moffat,
If I am given variable costs and sales price but the question doesn`t state which method to use to calculate it sales volume variance then by default should we use marginal costing principle or absorption costing principle?
Many Thanks
It is more likely to be marginal costing, but it depends on what information is given and whether or not the question specifies.
If you are referring to a specific question in the BPP Revision Kit then say which question and I will explain.
Thanks John.
Here is the question please taken from First Intuition book.
Standard cost for producing one unit
Direct Material 3.60
Direct Labour 0.60
Variable O/H 0.30
Standard selling price 9.00
Sales of 4600 units are budgeted each period. In the last period 4620 units were sold for 41,500.
Answer is 90 FavI guess as there is no Fix O/H given in standard cost card hence the use of Marginal costing principle?
Many Thanks
That is correct in that since there is no information about fixed costs there is no choice but to use marginal costing for the variance.
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