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“a business uses marginal costing to calculate variances. If they were to use absorption costing the current method of calculating the sales volume variance would be? ”
Sir what would be the answer to this?
The difference between the standard sales volume and the actual sales volume, multiplied by the standard profit per unit instead of multiplying by the standard contribution per unit. I explain this in my free lectures.
Obviously however you cannot be asked to type out answers to this sort of question in the exam – only choose the correct answer from several choices.
Hi Sir,
I also have the same question as above and the options are given as below. The solution given is “A”. But i do not think the answer is A.
Since the standard profit per unit is “selling price per unit – the absorption cost (including the fixed cost)”
and the marginal costing uses standard contribution per unit (selling price less marginal cost (does not include fixed cost) less variable selling cost). I think the answer should be DA Higher or the same
B Lower or the same
C The same
D Different but not able to say higher or lowerNeither you not the original post have stated what the actual question was!!
However the sales volume variance using absorption costing uses the standard profit, whereas the when using marginal costing it uses the standard contribution.
The contribution is always higher than the absorption profit, and therefore the sales volume variance using marginal costing will be higher than if using marginal costing. (It will be the same if there are no fixed overheads.)
Have you watched my free lectures on this?
Sir a question related to this topic, I’m asking this here because the post is already stating contribution, sir there was one mcq I couldn’t recall neither could i find it, but the answer was contribution and it said contribution would always be a better measure comparing to profit, and I don’t remember the question but i think it asked for which is best performance measure and there were options profit, contribution the rest 2 i forgot, is it because contribution doesn’t includes fixed ovhs comparing to net profit? If a similar question would appear in exam, we are to going select contribution against profit sir?
This isn’t really a related question because it is nothing to do with variances.
As to which is the better measure is concerned, it is more likely to be the contribution but it really depends on the circumstances of the question.
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