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sir this is a question from lsbf revision kit
please help us to find the cost per unit based on absorption costing
thank youalthough the answer is B i do not understand it how .
A product has a standard selling price of $80 per unit and a standard contribution of $18 per unit . in the last period the sales volume contribution variance was $3,600 adverse . the management accountant calculates that if the company had used standard absorption costing the sales volume profit variance would have been $2000 adverse .
What is the standard absorption cost per unit ?
A. $62
B. $70
C. $8
D. $52The sales volume must have been lower than budgeted by 3,600/18 = 200 units.
Therefore the standard profit using absorption costing must be $2,000 / 200 = $10 per unit.
Therefore the standard absorption cost must be 80 – 10 = $70 per unit.
Sir why don’t we divide
$2000/400 units ?Because 400 is the budgeted units
And then
Selling price less variable cost is contribution
So
$80
Less the vc
Is $18
Which is the contributionSo
Does that mean $62 is the variable cost ?Nowhere in the question does it say that 400 is the budgeted units.
The standard variable cost is indeed $62.
However the question asks for the standard absorption cost and I have explained how it comes to $70.
If sales volume is 200 lower than the budgeted then
Actual units could be 400 units right sirCan we take that way or
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