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A company budgeted to sell 5,000 units of a product in November at a standard price of $30 per unit and to earn a profit of $25,000. It actually sold 6,000 units at $28 per unit and earned a profit of $32,000.
What was the favourable sales volume profit variance for November?
A) $5,000
B) $7,000
C) $12,000
D) $30,000Answer A $5,000
Sir i didn’t get, whenever we find sales volume variance we multiply the difference with standard price, but here after finding the difference of budgeted and standard units sold which gives us 1,000 favourable since we sold more, i multiplied it with $30 and got $30,000
But in book it’s done like this (5000-6000) × $25,000/5000 = $5000
You have found the change in the revenue.
However the standard profit per unit is 25,000/5,000 = $5 per unit.
Therefore selling 1,000 units more than budgeted will give extra profit of 1,000 x $5 = $5,000.
I do explain this in my free lectures.
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