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A company has calculated its margin of safety as 20% on budgeted sales and budgeted sales are 5,000 units per
month.
What would be the budgeted fixed costs if the budgeted contribution was £25 per unit?
A £100,000
B £125,000
C £150,000
D £160,000
25 A company is reviewing actual performance to budget to see where there are differences. The following standard
information is relevant:
£
per unit
Selling price 50
––
Direct materials 4
Direct labour 16
Fixed production overheads 5
Variable production overheads 10
Fixed selling costs 1
Variable selling cost 1
––
Total costs 37
––
Budgeted sales units 3,000
Actual sales units 3,500
What was the favourable sales volume variance using marginal costing?
A £9,500
B £7,500
C £7,000
D £6,500About your first question (CVP) to me is the answer A
Margine of safety 20% and units 5000 (in units 20% of 5000 =1000)
considering that Mar. of Safety is: units budgeted- BEF —>
BEF= 5000 – 1000 = 4000BEF is also FIXED COST (x) / CONTRIB.
so 4000 = X/25
FIXED COST = 4000*25 = 100000
I am still studying Standard cost.
I will have a look later onalfo thanx so much.thats the correct answer.i wanted to know how it was calculated.you’ve really helped me and i now understand it.All the best in your exams.
you re welcome. I finished the standard costing chapter …
Regarding the 2nd Question: the “Sales Volume” variance under marginal cost.
What is the effect on profit of selling more units??
Under Marg. Cost the difference between Standard and Actual units is valued as STANDARD CONTRIBUTION.
Contribution is :
Revenue – Variable costs
50 – (4+16+10+1) = 19 –> (contrib. to cover the fixed costs)
The difference in units is 3000-3500 = 500
500*19 = 9500 ANSWER A
(if it was asked the same but using absorption we need to value the units at the standard profit)
Bye
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