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ACCA Applied Knowledge · Management Accounting · Monitoring performance and reporting

Kappa Co's budgeted profit was $50,000 on 10,000 units at a standard contribution of $8 per unit and fixed costs of $30,000. Actual sales were 9,500 units. The sales price variance was $4,750 favourable. Actual variable costs were exactly at standard, and actual fixed costs were $31,000. Using marginal costing, what was the actual profit?

Actual profit was $49,750. Start with budget profit of $50,000, deduct the $4,000 adverse volume variance (500 units x $8), add the $4,750 favourable price variance and deduct $1,000 of extra fixed costs. Variable costs matched standard, so no other variances arise.

  1. A$49,750Correct
  2. B$45,750
  3. C$50,750
  4. D$44,750

Explanation

Budget profit: 10,000 x $8 - $30,000 = $50,000. Sales volume variance = 500 x $8 = $4,000 adverse. Price variance +$4,750 favourable. Fixed cost expenditure variance $1,000 adverse. Actual = 50,000 - 4,000 + 4,750 - 1,000 = $49,750. Check: 9,500 x $8 = 76,000 + 4,750 - 31,000 = $49,750.

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