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Sales volume variance – $10,000 adverse
Sales price variance – $5,000 favourable
Total Cost variance – $12,000 adverseprofit on actual sales for the period was $120,000
Q: Why is the fixed budgeted profit $130,000 and not $137,000?
Thank you.
I assume that the question said that the standard profit on actual sales was $120,000.
Assuming that to be the case, then the only relevant variance is the sale volume variance and so the budgeted profit must have been 120,000 + 10,0000 = $130,000.
but isn’t sales value as a whole affected by both selling price and the volume?
or is this specifically asking about actual sales i.e how many sold = volume?
The actual profit is of course affected by the selling price.
However, as I wrote in my previous reply, I assume that the question referred to the standard profit on actual sales as being $120,000, and the standard profit is not affected by changes in the selling price.
why would the standard profit not be affected by changes in selling price?
It said ‘profit from actual sales’
Because the standard profit is arrived at using the standard selling price and the standard costs!!
If the question really did say ‘profit from actual sales’ and not ‘standard profit from actual sales’ then there was a mistake in the question.
If it was a question from an actual real exam, or from the BPP Revision Kit, then tell me which question and I will then check the wording.
https://specimen.accaglobal.com/Assignments/MA_FULL/ACCA.html
Q13.
On another check it does say ‘standard profit on actual sales’
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