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on fixed overhead capacity variance if the budgeted labor hours are more than the actual labor hours will the result be FAVORABLE OR ADVERSE
Adverse (if the actual hours worked are less than the budgeted hours)
If you watch the free lecture then I explain in the lecture why this is the case (and the easy way of remembering 🙂 )
Dear John, thank you for your lectures!
I have one question regarding the example in Opentuition Notes: Example 4, Chapter 14.
Sales Volume Variance (Sales Margin Variance – are these the same?):
In your lecture you said that it is calculated by taking differences between actual sales quantities and standard sales quantities multiplied by STANDARD PROFIT (in BPP they also define the calculation this way).
However in the solution to the Example 4, it is calculated differently: for actual quantities, we take the difference between ACTUAL PRICE and STANDARD COST – which is not the STANDARD PROFIT.
Could you please explain the different methods of calculation and when it applies?
Thank you,
Regards,
RustemThose workings are headed up “total sales margin variance” – it is the total variance due to changes in both the quantities and the selling price. The word margin is just to signify that it is showing the total affect on the contribution.
It can be analysis into the sales price variance and the sales volume variance. The sales volume variance can be further analysed into the sales mix variance and the sales quantity variance.
(The sales volume variance has not been shown here because it was not asked for, but is the total of the sales quantity and the sales mix)
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