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Variance

Forums › ACCA Forums › ACCA MA Management Accounting Forums › Variance

  • This topic has 5 replies, 2 voices, and was last updated 11 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
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    Posts
  • June 18, 2014 at 2:14 am #176921
    nguwah
    Member
    • Topics: 14
    • Replies: 9
    • ☆

    A company uses a standard marginal costing system. The following figures are available for the last accounting period in which the profit was $124000.

    Sales volume contribution variance $9000 favourable
    Sales price variance $8000 adverse
    Total variable cost variance $13,000 favourable
    Fixed cost expenditure variance $4,000 adverse

    What was the standard profit for the actual sales in the last accounting period?

    – $125,000
    -$134,000
    -$114,000
    -$123,000

    Dear Sir,

    Good day to you.

    Please help to explain above question.

    Thank you.

    June 18, 2014 at 8:22 am #176948
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    (If you want a reply from me, then in future please post in the F2 Ask the Tutor Forum. This forum is for students to help each other.)

    If the actual profit is 124,000, then to get the standard profit we need to work backwards, adding or subtracting variances as relevant.

    So the standard profit is 124,000 + 4,000 – 13,000 + 8,000 = 123,000

    (The sales volume variances is not relevant because the question asks for the standard profit on actual sales. The volume variance would only be relevant if it had asked for the budgeted profit.)

    June 18, 2014 at 8:48 am #176951
    nguwah
    Member
    • Topics: 14
    • Replies: 9
    • ☆

    Well noted….I would like to know why was deducted variable cost variance $13,000 (fav)… i understood that cost variance favourable means actual cost is lower than std…. now question need std profit so i deducted this figure before .. so i cannot get correct answer… please advice…

    Sorry to disturb you….
    Thank you very much

    June 18, 2014 at 4:39 pm #177100
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    The favourable cost variance means that the actual profit is higher than standard profit.

    So, standard profit is lower than actual profit.

    This question gives the actual profit, so the standard profit will be lower.

    June 19, 2014 at 12:44 am #177143
    nguwah
    Member
    • Topics: 14
    • Replies: 9
    • ☆

    Thank you very much!

    June 19, 2014 at 8:46 am #177182
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

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