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Hi please help me with this question
A company uses standard marginal cost No. Last month the standard contribution on actual sales was $10000 and the following variance arose:
Total variable costs variance:$2000 (A)
Sales price variance: $500(F)
Sales volum contribution variance:$1000(A)
What was the actual contribution for last month?The answer is10000+500-2000=8500. But I can’t understand why. Please help me with this. Thanks
zanica: Not in this forum because it is Ask the Tutor. You can with pleasure in the other F2 forum (and please do 🙂 )
$10,000 is the standard contribution on the actual sales (not the budgeted contribution).
Therefore the sales volume variance is not relevant.
The actual contribution will be higher than standard because of the sales price variance, and lower than standard because of the variable cost variance.
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