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

Budgeted sales were 1,000 units at a standard price of $50 and standard unit cost of $30 (marginal costing). Actual sales were 900 units at $52, actual total variable costs were $28,000, and there were no fixed cost variances. Under marginal costing, what is the sales volume contribution variance and what is the actual contribution?

The sales volume contribution variance is $2,000 adverse, being 100 units short times a $20 standard contribution. Actual contribution is $18,800, from sales of $46,800 less variable costs of $28,000.

  1. A$2,000 adverse; $18,800Correct
  2. B$2,000 adverse; $20,000
  3. C$5,000 adverse; $18,800
  4. D$2,000 favourable; $18,800

Explanation

Volume variance = (900-1,000) x ($50-$30) = $2,000 adverse. Actual contribution = 900 x 52 = 46,800 less 28,000 = $18,800. Using $50 per unit contribution gives the $5,000 distractor, which wrongly uses sales revenue instead of contribution.

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