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Martin Mags produces and sells industry magazines. The following budgeted information is
available for the year ending 31 December 20X6:
Budget Flexed Actual
budget
Sales (units) 120,000 100,000 100,000
$000 $000 $000
Sales revenue 1,200 1,000 995
Variable printing costs 360 300 280
Variable production overheads 60 50 56
Fixed production cost 300 300 290
Fixed administration cost 360 360 364
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Profit/(Loss) 120 (10) 5
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What are the total expenditure and volume variances?
Expenditure variance Volume variance
A $15,000 favourable $130,000 adverse
B $95,000 adverse $115,000 favourable
C $115,000 adverse $95,000 favourable
D $130,000 adverse $15,000 favourablei am not getting how they get the expenditure did they get total expenditure means variable and production overheads one not sure about volume also
The difference between the actual profit and the budget profit is 15,000.
Part of this difference is due simply to the fact that the sold fewer units (the volume variance) and if this was all that had changed then they would have made the flexed loss of 10,000. Therefore the volume variance is 130,000 adverse.
The reason they actually made 5,000 instead of a loss of 10,000 is because the actual costs and sales price were different from standard, and so the expenditure variance is the difference between the actual profit and the flexed profit, which is 15,000 favourable.
(Strictly the question is worded badly in that expenditure would normally relate only to the costs, but here is is meaning the costs and the sales).
sir you said difference between actual profir and budget profit is 15,000. how come because actual profit is 5,000 and budget profit is 120,000.
i got the volume varinace for this question from standard profit per unit and then multiplying with the difference with the acutal and flexed volume =130,000 adverse
with this i got the answer but i dont get it how expenditure varinace is done.
later on para three you said difference between actual profit and flexed profit is 15000 favourable, isnt the 10,000 A flexed profit how come it make favourable balance of 15000
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