How do we calculate this one
A company uses standard marginal costing. Its budgeted contribution the last month was $20,000.The actual contribution for month was $15,000, and the following variances have been calculated
Sales volume contribution variance $5,000 adverse
sales price variance $9,000 favourable
Fixed overhead expenditure variance $3,000 favourable
What was the total variable cost variance?
The answer is $9,000adverse
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Contribution variances
7y ago#1The total of the variances on the contributions is 20,000 - 15,000 = 5,000 (A).
The fixed overhead variance is not relevant because we are looking at the contribution.
Therefore the total of the other variances (sales volume, sales price, and variable costs) must equal 5,000 (A).
You know the sales price and the sales volume variances, so the variable cost variance is the missing figure to make the total equal to 5,000 (A).
Thank you very much it is clear now.
7y ago#3You are welcome :-)
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