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Professor, If we are given Standard Profit on Actual sales so we will do these (Price) variances:
(1) Sales Price variances
(2) Variable Overhead Expenditure variances
(3) Fixed Overhead Expenditure Variance
(4) Labor Rate Variance
(5) Material Price VarianceWe will leave all Quantity Variances like
(1) Sales Volume variances
(2) Variable Overhead Efficiency variances
(3) Fixed Overhead Volume Variance
(4) Labor Efficiency Variance
(5) Material Usage VarianceIs that right, professor?
No, that is not right.
The only difference between the standard profit on the actual sales and the budgeted profit is the sales volume variance.
If we start with the budgeted profit then we need all of the variances so as to end up with the actual profit.
If we start with the standard profit on the actual sales then we need all of the variances except for the sales volume variance so as to end up with the actual profit.
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