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variance

NNikita5y ago
Hello sir, Question : The Perseus Co a medium sized company, produces a single product in its one overseas  factory. For control purposes, a standard costing system was recently introduced.  The standards set for the month of May were as follows:  Production and sales 16,000 units  Selling price (per unit) $140  Materials:  Material 007 6 kilos per unit at $12.25 per kilo  Material XL90 3 kilos per unit at $3.20 per kilo  Labour 4.5 hours per unit at $8.40 per hour  Overheads (all fixed) $86,400 per month.  (They are not absorbed into the product costs)  The actual data for the month of May is as follows:  Produced 15,400 units which were sold at $138.25 each  Materials: Used 98,560 kilos of material 007 at a total cost of $1,256,640 and used 42,350  kilos of material XL90 at a total cost of $132,979.  Labour: Paid an actual rate of $8.65 per hour to the labour force. The total amount paid  out, amounted to $612,766.  Overheads (all fixed): $96,840  Required:  Prepare a statement of the variances which reconciles the actual with the standard  profit or loss figure. (Mix and yield variances are not required.)  My question : I am not sure why didnt they included Sales volume variance while reconciling it ? could you please help me to understand it.
John MoffatJohn MoffatTutor5y ago#1
The question asks you to reconcile the actual profit with the standard profit (i.e. the standard profit on the actual sales). The sales volume variance is the difference between the standard profit and the budgeted profit and so here is not needed. (Had the question asked you to reconcile the actual profit with the budget profit, then the sales volume variance would have been needed.)
NNikita5y ago#2
oh thats a very minute detail.. Thank you for letting me know ..
John MoffatJohn MoffatTutor5y ago#3
You are welcome :-)
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