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mr. moffat I had problem with solving variances backward kindly explain it to me

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › mr. moffat I had problem with solving variances backward kindly explain it to me

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.
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  • Author
    Posts
  • May 25, 2015 at 5:03 am #248725
    omar
    Member
    • Topics: 15
    • Replies: 18
    • ☆

    A company uses a standard costing system. the following figures are available for the last accounting period in which the profit has $124,000.
    sales volume contribution variance $9,000 favourable
    sales price variance $8,000 adverse
    Total variable cost variance $13,000 favourable
    Fixed cost expenditure variance $4,000 adverse

    what has the standard profit for the actual sales in the last accounting period?

    a) $125,000
    b) $123,000
    c) $134,000

    May 25, 2015 at 7:55 am #248760
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54684
    • ☆☆☆☆☆

    Because they ask for the standard profit for the actual sales (not for the budgeted profit) the sales volume variance is not relevant. It is only the other 3 that are relevant.

    So if the standard profit for actual sales is X, then the actual profit will be X – 8,000 + 13,000 – 4,000 = 124,000

    So X +1,000 = 124,000

    So X = 123,000

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    Posts
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