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Is this mistake in answer book?

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Is this mistake in answer book?

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
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  • Author
    Posts
  • October 4, 2019 at 10:31 pm #548140
    ivie2019
    Member
    • Topics: 8
    • Replies: 4
    • ☆

    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 🙁

    October 5, 2019 at 1:35 pm #548160
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51555
    • ☆☆☆☆☆

    There 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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