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Dear sir,
I do have watched your lectures but I still have some difficulties concerning fixed overhead.
– For the total variance and expenditure variance, why did you charged the full cost per unit($15) for production and not $3?$3 is the standard cost per hour and is only relevant when working in hours (which is only for the capacity and efficiency variances).
Since the volume variance is in units we charge it at the fixed overhead per unit.A company uses a standard absorption costing system.
Actual profit was $108,000Sales volume variance 6,000(A)
sales price variance 5,000(F)
Total variable cost variance 7,000(A)
Fixed cost expenditure variance 3,000(F)
Fixed cost volume variance 2,000(A)What was the standard profit for actual sales?
-In the BPP book, it says sales volume variance not required. Why so?
To obtain the answer, all the variances have been used except the sales volume variance.
Could you explain why?Thanks.
The sales volume variance is calculated by comparing the budget profit with the standard profit for the actual sales.
In this question you are not asked for the budget profit (if you were then the sales volume variance would be relevant) – instead you are asked for the standard profit on the actual sales, and so the fact that the actual sales volume is different from the budget volume is not relevant.
In the free lecture notes,concerning the operating income for marginal costing:
– Does ‘588,000’ represent the standard profit on actual sales?
-What does ‘42,000’ represent?(I do have watched your free lecture notes)
Thanks.
Sorry, but I have no idea at all which example in the lecture notes you are referring to.
In your video concerning variance, after calculating all the variances, you have done an operating income where you have done the following;
-Budget profit 56,000 less sales volume variance 2800(F) which gives 58,800
-58800 less sales price variance 16,800(A) which gives 42,000My question is that
-Does ‘58,800’ represent the standard profit on actual sales?
-What does ‘42,000’ represent?58,800 is the standard profit on actual sales.
42,000 doesn’t really represent anything – it is a sub-total.
Standard direct material cost(5KG at $2 per kg)=$10 per unit
Total direct material cost $2,400
Direct material price variance $800(A)
Direct material usage variance$400(F)What is the actual production?
The answer is 200 units
How to obtain the answer?
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