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A company uses standard absorption costing.Actual profit last period was $25,000, which was $ 5,000 less than budgeted profit. The standard profit on actual sales for the period was $15,000.only three variances occurred in the period. A sales volume, sales price and a direct material price variance.
which of the following is a valid combination of the three variances?the correct answer in the text is
sales volume profit variance $15,000 A, sales price variance $2000 F and direct material price variance $ 8,000 F. Please, I want to know the logic of having this combination as the answer.Budgeted profit must have been 25000 + 5000 = 30000
Sales volume variance is the difference between standard profit and budgeted profit.
The other two variances together explain the difference between actual profit and standard profit.
The free lectures on variance analysis will help you.
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