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Hello sir
Company uses standard marginal costing. Budgeted contribution $30,000 actual contribution $20,000 following variance is have been calculated-
Sales volume contribution variance $5,000 adverse
Sales price variance $10,000 favourable
fixed overhead expenditure variance $3,000 favourable.What was the total variable cost variance.?
Answer given 15,000 adverse.So actually I don’t know how to solve such questions majorly I am facing problem to tackle such type of question even though I know how to calculate individual variances. What is the actual relationship between them? . This is not about this question but sometime the question says to find fixed overhead expenditure variance from the given information above or any other things.
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Just I need to know basic concept to tackle any of these kind question.Thanks you sir.
The variances analyse the difference between the budget contribution and the actual contribution – except for the fixed overhead variance which is irrlevant when looking at the contributions.
You know that the difference between the budget and actual contribution is $10,000.
This is the total of the sales volume, sales price, and variable cost variances. You know what the sales volume and sales price variances are, and so the variable cost variance is the missing figure.
The same applies to all questions of this type, but if instead of telling you the contributions they told you the budget and actual profits then the fixed overhead variance would also be part of the calculation.
Have you watched my free lectures on variances? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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