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Hello,
This is my first time on the forum.
I am having serious trouble understanding the section on variances and operating statement – example below:A company uses standard marginal costing. Last month the standard contribution on actual sales was $10000 and the following variances arose.
total variable costs variance – 2000A
Sales price variance – 500F
Sales volume contribution variance – 1000 A
What was the actual contribution for last month?
10000+500-2000=8500
I have tried to mix and match the lines against the Operating statement in my BPP book and I am just not getting it…the wording in the example doesn’t match to the Operating statement and I do not think I am putting the lines in the correct place.
I would be really grateful if somebody could help me with this, I have tried so hard but I am just completely stuck now.
Thank you very much.Sales price=contribution+variable costs
so is
sales price variance=contribution variance + variable costs variance.
sales price fav means it is increase in value
variable costs adv means it is increase in value500F=contribution variance +2000,
contribution variance=-1500
decrease in value indicates it is adverse
therefore
std contribution-1500=actual contribution
10000-1500=actual contribution
8500=actual contributionhere, contribution volume variance is irrelevant info.
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