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The following information relates to the next three questions.
A company has a budgeted contribution of £34,000 and budgeted profit of £15,000 for a month. At the end of the month, the following variances are calculated:Sales volume
2,000 F
Sales price
3,000 (A)
Material price
4,000 F
Material usage
1,000 (A)
Labour efficiency
1,500 (A)
Labour rate
2,200 (A)
Variable expenditure
3,500 F
Variable efficiency
1,000 (A)
Fixed expenditure
5,000 FWhat is the standard contribution of actual sales?
A. £33,000.
B. £34,800.
C. £36,000. ok !!
D. £39,800.
31. What is the actual profit?
A. £15,800.
B. £20,800.
C. £34,800.
D. £39,800.
MY Answer is £24800 with marginal costing, in answer explanation it is with absorption costing £20800 then how do I know which I need to follow from the question, as its given either budgeted contribution or budgeted profit, question were linked with next three questions and first question relates to marginal costing and next I assume with same marginal costing but actually is with solved it with a.c. as 31. qs. find actual profit could be for both? am asking just to save the time in exam otherwise I’ll end up to do both and waste time in exam to check the answers
32. What were the actual fixed costs for the period?
A. £5,000.
B. £14,000. ok!
C. £19,000.
D. £24,000.
In this 32. qs. I solved it with guessed calculation but want to know the explanation pleaseFirstly, the whole question is on marginal costing – it if was absorption costing then there would have even a fixed overhead volume variance (or a capacity and efficiency variance, which would have added up to the volume variance).
The budgeted fixed overheads were 19,000 (34,000 – 15,000) and therefore the actual fixed overheads were 14,000 (19,000 – 5,000).
Since the standard contribution on actual sales was 36,000, then then actual contribution must be 36,000 as adjusted by all of the variances apart from the sales volume variance and the fixed overhead variance, which comes to 34,800. So the actual profit is the actual contribution of 34,800, less the actual fixed overheads of 14,000, which is 20,800.
I do suggest you watch my free lectures on variances.My lectures are a complete free course for Paper F2 and cover everything needed to be able pass the exam well.
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