Skip to content

CMA Intermediate · Management Accounting · Introduction to Management Accounting

As part of budgetary control, a management accountant at Rohit Engineering Ltd. finds that budgeted sales were 10,000 units at ₹200, while actual sales were 9,500 units at ₹204. Budgeted contribution per unit was ₹80. What is the sales price variance and the sales volume contribution variance?

Sales price variance is ₹38,000 Favourable and sales volume contribution variance is ₹40,000 Adverse. Price is ₹4 above budget on 9,500 actual units, while volume fell 500 units short, costing ₹80 contribution each.

  1. A₹38,000 Favourable and ₹40,000 AdverseCorrect
  2. B₹38,000 Favourable and ₹38,000 Adverse
  3. C₹40,000 Favourable and ₹40,000 Adverse
  4. D₹38,000 Adverse and ₹40,000 Favourable

Explanation

Price variance = (204 - 200) x 9,500 = ₹38,000 F. Volume contribution variance = (9,500 - 10,000) x 80 = ₹40,000 A. Using budgeted units for price variance gives the wrong ₹40,000 F.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Management Accounting shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Management AccountingFree diagnostic mock

More Introduction to Management Accounting questions