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Hi, I got a serious problem on a practice question from Chapter 22 // Further Variance Analysis in Paper F2. The question is given below:
Q: A company uses standard marginal costing. Last month the standard contribution on actual sales was $10,000 and the following variances arose.
Total variable costs variance– $2,000 (A)
Sales price variance– $500 (F)
Sales volume contribution variance– $1,000 (A)What is the actual contribution for last month?
A $7000
B $7500
C $8000
D $8500In my opinion, the the answer should be B. But, in the book, the answer was D. Cause they ignore to adjust the “Sales volume contribution variance”. But the example of marginal operating statement in the book shows Sales price and volume contribution variances are adjusted to the Standard contribution to find out the actual contribution. But I could not understand why they ignored it. Please give me a proper solution to this question.
Thanks in advance.
The solution you have is a proper solution!
The question gives you the standard contribution on the actual sales, and so the sales volume variance is not relevant.
The sales volume variance is the difference between the standard contribution on the budgeted sales and the standard contribution on the actual sales. Since you are given the standard contribution on the actual sales, it is of no relevance.
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