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A product has a standard selling price of $80 per unit and a standard contribution of $18 per unit. In the last period the sales volume contribution variance was $3,600 adverse. The management accountant calculates that if the company had used standard absorption costing the sales volume profit variance would have been $2,000 adverse.
What is the standard absorption cost per unit?
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Given that the standard contribution is $18, they must have sold 3,600/18 = 200 units less than budgeted.
Since the sales volume profit variance is $2,000, the standard profit per unit must be 2,000/200 = $10.
The standard selling price is $80, so the standard absorption cost must be 80 – 10 = $70.
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