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ACCA Applied Knowledge · Management Accounting · Reconciliation of budgeted and actual profit

Borel Co uses marginal costing. Budgeted sales were 5,000 units with a standard selling price of $20 and a standard variable cost of $12 per unit. Actual sales were 5,400 units. What is the sales volume variance?

The sales volume variance is $3,200 favourable. Under marginal costing the variance is valued at standard contribution of $8 per unit ($20 less $12). Actual sales exceeded budget by 400 units, so 400 x $8 equals $3,200, and higher volume is favourable.

  1. A$3,200 favourableCorrect
  2. B$8,000 favourable
  3. C$4,800 favourable
  4. D$3,200 adverse

Explanation

Under marginal costing the sales volume variance is valued at standard contribution: ($20 - $12) = $8 per unit. The volume difference is 5,400 - 5,000 = 400 units, so 400 x $8 = $3,200 favourable. Using the selling price of $20 would give $8,000, which is wrong because it ignores the variable cost.

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