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Hello tutor,
The sales volume variance will be calculated by multiplying the volume difference between actual and budget with the unit contribution (for marginal costing) or unit profit (for absorption costing). But I do not get the logic behind it, as I thought this variance can be computed like this: volume difference * actual price/ budgeted price. Can you please explain the underlying logic for that formula?
Thank you tutor!
The volume variance is just looking at the effect that a change in the number of units sold would have on the profit or contribution if everything else (i.e. the selling price and all the costs) stayed the same i.e. stayed as standard. Changes in everything else are considered when we look at the other variances.
Have you actually watched my free lectures on variances because I do make this very clear in my lectures?
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