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Variance

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Variance

  • This topic has 1 reply, 2 voices, and was last updated 11 months ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
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    Posts
  • October 14, 2022 at 3:36 pm #668616
    AbrahamChinYuan
    Participant
    • Topics: 22
    • Replies: 22
    • ☆

    Hi Sir,

    Regarding this question

    Martin mags produces and sells industry magazines. The following budgeted information is available for the year ending 3 December 2006.

    Budget Flexed Actual
    Sales units. 120,000. 100,000. 100,000
    $000. $000. $000
    Sales revenue. 1,200. 1,000. 995
    Variable printing. 360. 300. 280
    Costs
    Variable prod. 60. 50. 56
    Costs.
    Fixed prod cost. 300. 300. 290
    Fixed admin cost. 360. 360. 364

    Profit/loss. 120. (10). 5

    What are the total expenditure variance

    The answer given is 15k usd favourable.

    I saw your solution is below:

    The actual profit is 5,000 and the flexed profit is (10,000). The difference of 15,000 (favourable) is the expenditure variance.

    But my understanding is
    Flexed budget expenditure ( 300k + 50k + 300k + 360k ) = 1010k usd
    Actual budget expenditure (280k +56k + 290 k +364k )= 990 k usd

    the variance is 1010k -990k =20k usd.

    and may you explain your solution? i might miss some important points in your lectures.

    October 15, 2022 at 11:31 am #668674
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 53174
    • ☆☆☆☆☆

    Although generally expenditure refers to payments, in the context of this question it is referring to both revenue and payments and is therefore the difference between the actual profit and the flexed profit.

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