Hi!
Question explanation in answer page has 3 steps in explaining, but I got lost in third step which I think it's printing error?
Can you confirm?
So:
A company has recorded the following variances for a period: Sales volume variance Sales price variance Total cost variance $10,000 adverse $5,000 favourable $12,000 adverse Standard profit on actual sales for the period was $120,000. What was the fixed budget profit for the period?
Answer:
Sales volume variance:
(budgeted sales units – actual sales units) * standard profit per unit =
10,000 adverse
Standard profit on actual sales: (actual sales units * std profit per unit) = $120,000
Fixed budget profit: (120,000 +10,000) = $130,000
My question is WHY 10000 are added to 120000 if 10000 are adverse,- so I thought 120000-10000 and profit should be 110000 not 130000
Please help :(
Ask the Tutor ACCA MA
Is this mistake in answer book?
6y ago#1There is no mistake.
The standard profit on the actual sales was $120,000.
There is an adverse sales volume variance which means that the std profit on actual sales is less than it should have been.
Therefore the fixed budget profit must have been 10,000 higher at 130,000.
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