ACCA Applied Knowledge · Management Accounting · Variance calculations and analysis
Dalton Ltd uses absorption costing. Budgeted sales were 3,000 units at a standard price of $30, with a standard full cost of $22 per unit. Actual sales were 2,700 units. What is the sales volume profit variance?
The sales volume profit variance is $2,400 adverse. Sales fell 300 units short of budget, and under absorption costing each unit carries a standard profit of $8 (price $30 less full cost $22), so profit is $2,400 lower.
- A$2,400 adverseCorrect
- B$2,400 favourable
- C$2,700 adverse
- D$9,000 adverse
Explanation
Under absorption costing the standard profit per unit is 30 - 22 = $8. The volume shortfall is 3,000 - 2,700 = 300 units. Variance = 300 x 8 = $2,400 adverse. Using $9 would be a wrong margin base; $9,000 uses the selling price.
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