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John Moffat.
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dingdong02
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The following question is taken from the July to December 2017 exam period.
A company uses standard marginal costing to monitor performance. The budgeted profit and budgeted fixed overhead for a month were $25000 and $12000 respectively. In the month the following variance occurred:
Sales volume contribution $1000 Adverse
Sales price $2000 favourable
Total variable costs $4000 Adverse
Fixed production overhead expenditure $500 Adverse
What was the actual profit for the month?
Ans) 21500
Sir my question is why they didn’t deduct budgeted fixed overhead from the actual contribution?
John Moffat
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The budgeted profit will already be after charging the budgeted fixed overheads, so it is only the variance that needs adjusting for.
dingdong02
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