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Hello Sir,
Hope you’re having a good day.
I’ve got this question in Kaplan’s Exam Kit but I’m unable to solve it even though the answer is given. I’ll be very thankful if you explain the answer to meFollowing is the budgeted information for year ending 31 December 20X6:
Budget:
Sales in units = 120, 000
$(000)
Revenue: 1,200
Variable printing cost: 360
Variable production overhead: 60
Fixed production cost: 300
Fixed administration cost: 360
Profit: 120Flexed Budget
Sales in units = 100, 000
$(000)
Revenue: 1,000
Variable printing cost: 300
Variable production overhead: 50
Fixed production cost: 300
Fixed administration cost: 360
Loss: (10)ACTUAL
Sales in units = 100, 000
$(000)
Revenue: 995
Variable printing cost: 280
Variable production overhead: 56
Fixed production cost: 290
Fixed administration cost: 364
Profit: 5
What are the total expenditure and volume variances?Ans: Expenditure variance $ 15,000 Favorable
Volume Variance $ 130,000 adverseThe volume variance is the difference between the flexed and fixed budget profit (because the only difference is the change in volume).
The expenditure variance is the difference between the actual profit and the flexed profit (because both sets of figures are for the same volume of activity)
Thanks a lot sir. This concept wasn’t explained anywhere in the Kaplan book. Thankyou
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