- May 16, 2020 at 6:04 am
Can you please help me with the below question on BPP?
“A company uses a st. absorption costing system. The following figures are available for the latest accounting period in actual profit was $210,000.
Sales profit volume variance 10,000 A
Sales price variance 7,500 F
Total Variable cost variance 9,000A
Fixed Cost Expenditure variance 5,000F
Fixed cost volume variance 3000A
What was the standard profit for actual sales in last accounting period? ”
Why don’t we consider the sales volume variance when we calculate back to get the answer?May 24, 2020 at 11:49 pm
The reason it is kept separate is that the sales volume variance used to flex the budgeted profit (budgeted units * std profit) and then this adjusted profit figure is reconciled via the other variances to obtain the actual profit figure in the proforma operating statement. Please see lecture below for a great explanation of this.
CathMay 26, 2020 at 7:15 am
Is that because the question asks ‘standard profit for actual sales in last accounting period’, not the original budget profit??May 28, 2020 at 3:05 am
I passed P1. Thanks OpenTuition and the team.May 28, 2020 at 7:11 pm
you’re welcome – glad to have helped!
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