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Hi, John.
I got stuck in the question below.
A business uses marginal costing. If they were to use marginal costing the sales volume variance would be
A Higher or same
B Lower or same
C The same
The answer Is a
I think you have mistyped the question, and that you meant to type “The business uses absorption costing”
If so, then the answer is A
With absorption costing, the variance is the units multiplied by the standard profit per unit.
With marginal costing it is multiplied by the standard contribution per unit.The profit is contribution minus fixed overheads. So the contribution is always higher than the profit (unless there are no fixed overheads) and therefore the variance using contribution (marginal costing) will be higher than that using profit (absorption costing).
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