Total Expenditure and Volume Variance! Pls help

MMariah10y ago

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 me Following 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: 120 Flexed 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 adverse

John MoffatTutor10y ago#1

The 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)

MMariah10y ago#2

Thanks a lot sir. This concept wasn't explained anywhere in the Kaplan book. Thankyou

John MoffatTutor10y ago#3

You are welcome :-)

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