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JIBZ PLC had budgeted sales of 10,000 units for the year 2003. The actual sales were 8000 units with the selling price of $50 which was higher than the budgeted selling price by $5. The budgeted fixed cost was $80000 while the budgeted profit was $20 per unit. Calculate sales volume variance for the year 2003 (Assume marginal costing is used by JIBZ PLC).
Although the answer is 56000 adverse. I don’t know-how?
Given that they budgeted on sales of 10,000 units, and budgeted fixed costs were $80,000, the standard fixed cost must be $8 per unit.
Therefore the standard contribution is 20 + 8 = $28 per unit.
They sold 2,000 less than budgeted and therefore the sales volume variance is 2,000 x $28 = $56,000 adverse.