It is the standard profit per unit. The standard selling price is $75 and the standard cost is $68 (from the question) and therefore the standard profit is 75 – 68 = $7 per unit.
I explain in the first lecture on variances why, when using absorption costing, we have to deal with fixed overheads differently. It is exactly the same reason as having to deal with the over/under absorption of fixed overheads as explained in the earlier lectures on absorption and marginal costing.
hi, you never looked at why the fixed overheads changed in this lecture, or if you would do a fixed overhead variance. as the fixed overheads didn’t stay the same through the fixed budget, flexed budget and actual results. Please explain this. thank you
semilooreolalere says
hey john, lovely videos
recently concluded my first stage. i had 80 in this paper(MA)
John Moffat says
Thank you for your comment, and congratulations on passing MA with such a high mark 馃檪
DIVIJ says
Why is it called sales volume variance, when we multiply the difference between actual and budgeted sales by standard profit per unit??
John Moffat says
Because it is measuring the affect of the change in the number sold (i.e. the volume of the sales).
boyemaggie says
Hi Mr John, I don’t really understand where $7 came from.
John Moffat says
It is the standard profit per unit. The standard selling price is $75 and the standard cost is $68 (from the question) and therefore the standard profit is 75 – 68 = $7 per unit.
boyemaggie says
Oh, okay. Thanks!
John Moffat says
I explain in the first lecture on variances why, when using absorption costing, we have to deal with fixed overheads differently. It is exactly the same reason as having to deal with the over/under absorption of fixed overheads as explained in the earlier lectures on absorption and marginal costing.
John Moffat says
This is the 4th out of 5 lectures. Watch the 5th lecture!!
haleemah97 says
hi, you never looked at why the fixed overheads changed in this lecture, or if you would do a fixed overhead variance.
as the fixed overheads didn’t stay the same through the fixed budget, flexed budget and actual results. Please explain this. thank you