Forums › ACCA Forums › ACCA MA Management Accounting Forums › Further variance analysis F2
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- March 5, 2018 at 7:06 pm #440444AnonymousInactive
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AD Ltd manufactures and sells a single product, E, and uses a standard absorption costing system.
Standard cost and selling price details for product E are as follows.
$ per unit
Variable cost 8
Fixed cost 2
10
Standard profit 5
Standard selling price 15
The sales volume variance reported for last period was $9,000 adverse.
AD Ltd is considering using standard marginal costing as the basis for variance reporting in future. What would be the correct sales volume variance to be shown in a marginal costing operating statement for
last period?
A $6,428 (A)
B $6,428 (F)
C $12,600 (F)
D $12,600 (A)The answer by BPP is following. But it is pity I didnt understand this question and its answer. Specially this part of the answer Sales volume variance in terms of contribution = $9,000(A)/$5× $7 = $12,600 (A)
The sales volume variance in a marginal costing system is valued at standard contribution per unit, rather than standard profit per unit.
Contribution per unit of E = $15 ? $8 = $7
Sales volume variance in terms of contribution = $9,000(A)/$5× $7 = $12,600 (A)March 5, 2018 at 7:48 pm #440463But the BPP answer explains exactly the solution!
Have you not watched my free lectures on this (and therefore understand the difference between profit and contribution)?? You cannot expect me to type out all of my lectures here 🙂
The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
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