- This topic has 1 reply, 2 voices, and was last updated 9 years ago by
.
- Posts
If question ask what was the standard profit for actual sales in the last accounting period ?
Understand should not take in the “sales volume profit variance” and if sales volume profit variance if adverse should be added but less if favourable.
However, if the question ask what was the actual contribution for last month ? I have take in the ” sales volume contribution variance” then my answer is wrong but when I went back to work does not include the answer is correct.
kindly advise whether uses standard absorption costing and marginal costing is the same way should not to take in “sales volume profit variance” ?
thank you
Profit is contribution less fixed costs.
If using absorption costing the standard profit will indeed be budgeted profit as adjusted by the sales volume profit variance.
If using marginal costing you have two choices (which give the same answer). One is to take the budget contribution, adjust by the sales volume contribution to get the standard contribution, and then subtract the budgeted fixed overheads to get the standard profit.
Alternatively take the budget profit (budget contribution minus budget fixed overheads) and adjust by the sales volume contribution variance to get the standard profit.
- You must be logged in to reply to this topic.