Because it is an equal annual cash flow and it is therefore faster to use the annuity tables.

(Have you watched my free lectures on this? My lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.)

A company uses standard marginal costing.Its budgeted contribution for last month was $20,000. The actual contribution for the month was $15,000, and the following variances have been calculated: Sales volume variance $ 5000 Adv- Sales price variance $9000 Fav- Fixed overhead expenditure variance $9000 Fav-. What was the total variable cost variance?. Can you Please help me out?

You should ask question like this in the Ask the Tutor forum, and not as a comment on a lecture. I am not always able to see comments on lectures, but I always reply to questions in the Ask the Tutor Forum within 24 hours.

The budget contribution is 20,000. After adjusting for the sales volume and sale price variances is gives a contribution of 20,000 + -5,000 + 9,000 = 24,000. Since the actual contribution was 15,000, the variable cost variance must be 24,000 – 15,000 = 9,000 adverse. The fixed overhead variance is not relevant because we are looking at the contribution.

carl123 says

Sir, for question (b)(iii), why did you use the annuity table instead of the present value table?

John Moffat says

Because it is an equal annual cash flow and it is therefore faster to use the annuity tables.

(Have you watched my free lectures on this? My lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.)

Peter says

A company uses standard marginal costing.Its budgeted contribution for last month was $20,000. The actual contribution for the month was $15,000, and the following variances have been calculated:

Sales volume variance $ 5000 Adv-

Sales price variance $9000 Fav-

Fixed overhead expenditure variance $9000 Fav-.

What was the total variable cost variance?. Can you Please help me out?

John Moffat says

You should ask question like this in the Ask the Tutor forum, and not as a comment on a lecture. I am not always able to see comments on lectures, but I always reply to questions in the Ask the Tutor Forum within 24 hours.

The budget contribution is 20,000. After adjusting for the sales volume and sale price variances is gives a contribution of 20,000 + -5,000 + 9,000 = 24,000.

Since the actual contribution was 15,000, the variable cost variance must be 24,000 – 15,000 = 9,000 adverse.

The fixed overhead variance is not relevant because we are looking at the contribution.