Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › BPP Revision Kit Sep 2020 – No. 178 – Budgeting

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- August 7, 2020 at 4:52 pm #579546
“A company makes and sells 3 products, budgeted and actual results for the period just ended were as follows.

Budgeted sales (units): 2400 –> X 800, Y 1000, Z 600

Budgeted profit per unit ($) —–> X 10, Y 6, Z 12

Actual sales (units): 2250 ——-> X 700, Y 1200, Z 350

Actual profit per unit ($) ———-> X 8, Y 6, Z 16What was the adverse sales quantity variance?”

I thought I can calculate it by (800-700)*10 + (1000-1200)*6 + (600-350)*12 = $2800

But the explanation in the book shows that a weighted average profit per unit must be calculated (800*10+1000*6-600*12)/2400 = $8.83. Then multiplied by quantity variance in units of 150 units to get to final answer of $1325.

I don’t quite understand why. Could you help me with this one please? Thank you so much.

August 7, 2020 at 5:53 pm #579563What you have calculated is the total sales volume variance.

This variance of $2800 occurs partly because the total sales in units was different from budget and partly because the mix of the sales between the different products changes.

For the quantity variance we compare the actual sales at standard mix with the budgeted sales.

Do watch my free lectures on this. I calculate the quantity variance in a different way than the BPP answer (but obviously get the same figure 🙂 ) but I find my way more obvious and easier to remember 🙂

The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.

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