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February 3, 2020 at 6:32 pm
Why did you calculate the contribution for ‘Actual’ a different way than for Fixed or Flexed?
E.g. : 8000 x 22 = $176,000 for Fixed, 8400 x 22 = $184,800 for Flexed, $613,200 – $448,818 = $164,382 for Actual.
April 22, 2020 at 9:51 am
This is because the difference between selling price and cost of sales (contribution) is not the same in budgeted and actual.
In reality, we have sold for less per unit, and paid more for materials, for example, both of which reduce the contribution per unit, so $22 contribution is no longer applicable.
However, we can still calculate total contribution, as we have revenue and cost of sales, which is what has been done.
Hope that helps.
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