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ACCA Applied Knowledge · Management Accounting · Spreadsheets

A spreadsheet computes contribution as =B3*(C3-D3), where B3 is units sold, C3 is selling price and D3 is variable cost per unit. Test data are entered: units 2,000, price $15 and variable cost $9. The model displays $12,000. A control total prepared separately by the accountant uses the contribution per unit multiplied by units. What does the comparison show, and which action is correct?

The independent calculation gives $6 contribution per unit times 2,000 units, which is $12,000, matching the model. The formula passes this test, but a single test does not prove the model is correct, so further tests with different and extreme data are advisable.

  1. AThe two agree at $12,000, so the formula passes this test, though further tests with other data are still neededCorrect
  2. BThe two disagree by $6,000, so the formula must be wrong
  3. CThe two disagree by $18,000, so variable cost should be added to price
  4. DThe model should show $30,000, so units must be multiplied by price only

Explanation

Contribution per unit is 15 - 9 = $6; 2,000 x 6 = $12,000. This equals the model, so the formula passes. One test cannot prove a model is fully correct, so additional test data, including extreme values, should be used.

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