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Hi sir,
this is a question from kaplan exam kit book.Q) A company uses standard marginal costing.
Last month the standard contribution on actual sales was $10,000 and the following variances arose:Total variable cost variance $2,000 adverse
Sales price variance $500 favorable
Sales volume contribution variance $ 1,000 adverseWhat was the actual contribution for last month?
my doubt is in understanding of the question and the marking scheme says to ignore sales volume contribution variance. please explain how to do such questions.
The question is testing your understanding of what the variances are – there is no ‘special’ way of doing them.
The sales volume variance is the difference between the budgeted contribution and the standard contribution on actual sales.
Since the question gives you the standard contribution on actual sales, the sales volume variance is of no relevance.You need to learn the ‘rules’ for all of the variances, and I suggest that you watch my free lectures on variance analysis. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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