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Sir,
I cannot understand how the sales margin variance has been calculated. I referred to the answer to example 4 but I still don’t get it.
Is it not
Actual sales at actual profit – Actual sales at standard profitNo.
It is actual sales x (actual selling price – standard cost) – budget sales x (std selling price – std cost)
As is written immediately above the answer, using for sales variance calculations we always use standard cost. Actual profit per unit will be different due to the actual cost being different, but differences in the costs are dealt with in the cost variances (materials, about etc..)
(It might help you to watch the Paper F2 lecture on sales variances, even though in Paper F2 we only ever have just one product)
Sir,
The answer to sales mix variance states that
actual total sales* actual selling price – actual total sales* standard profitBut the answer shows
actual total sales of actual mix at*standard profit – actual sales of standard mix at standard profitWhich is the right one?
Sir,
My previous doubt was cleared from the next calculation. Sorry for disturbing you and thanks for the previous reply. 🙂
Sir,
A question says:Budgeted sales for 2008 : 5000 units
Standard contribution: $9.60
A recession in 2008 meant that the market for the products declined by 5%.
Market share also fell by 3%.
Actual sales were 4500 units.Calculate planning and operational variances for sales volume.
The answer provided is as follows:
Planning Variance:
Budgeted Sales : 5000 units
Revised Budgeted Sales : 4750 units
Variance = 250 units @ $9.60 = $2400 (A)Operational Variance
Actual Sales : 4500 units
Revised Budget Sales : 4750 units
Variance = 250 units @ $9.60 = $2400 (A)I understand and agree with the answer. My question is, where is the market share decrease of 3% accounted?
The operational variance can only be due to the fall in market share. We cannot check it separately (using the 3%) because we do not know the size of the market.
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