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Dear sir John moffat
In my LSBF revision kit
I have a problem
In The below question of the variance analysisThe budgeted contribution for a department is $50000 . Budgeted fixed costs are $10000. The department operates a marginal costing system and the variances are as follows .
Sales price variance 2000 adv
Sales volume 4500 fav
Total material var. 10300 fav
Total labour var 8400 adv
Var cost var 4500 adv
Total fixed oh variance 8400 favRequired
What is the actual profit ?A) 52500
B) 49900
C)58300
D) 48300My problem is
I calculated the actual profit
And ended up with 58300But the answer says it’s D
48300And according to my revision kit
In the answer
They have adjusted the fixed cost 10000 again
My argument is that
We already have the fixed overhead variance so why do we need to take that fixed cost of 10000 into consideration?Please be kind enough to give us a solution to this question
Thank you
The have not taken the 10,000 twice. The question gives you the budgeted contribution, and contribution is the profit before fixed costs.
The budgeted contribution is 50,000.
Therefore the actual contribution is 50,000 – 2,000 + 4,500 +10,300 – 8,400 – 4,500 = 49,900.
Profit is contribution less fixed costs. The actual contribution is 49,900 as above.
The actual total fixed costs are 10,000 – 8,400 = 1,600.Therefore the actual profit is 49,900 – 1,600 = 48,300.
It might help you to watch my free lectures on this. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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