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.
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MAVariance
12y ago#1(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.)
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
12y ago#3The 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.
Thank you very much!
12y ago#5You are welcome :-)
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