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ACCA Applied Knowledge · Management Accounting · Standard costing system

Kelp Co budgeted sales of 1,000 units at a standard selling price of $50 and a standard contribution of $20 per unit. Actual sales were 1,100 units at $48 each. Using marginal costing, what are the sales price and sales volume variances?

The sales price variance is $2,200 adverse and the sales volume variance is $2,000 favourable. Price: 1,100 units sold $2 below standard. Volume: 100 extra units valued at the standard contribution of $20 per unit under marginal costing, not at the selling price.

  1. APrice $2,200 adverse; volume $2,000 favourableCorrect
  2. BPrice $2,000 adverse; volume $2,200 favourable
  3. CPrice $2,200 adverse; volume $5,000 favourable
  4. DPrice $2,200 favourable; volume $2,000 adverse

Explanation

Price variance = 1,100 x ($48 - $50) = $2,200 adverse. Volume variance = (1,100 - 1,000) x $20 standard contribution = $2,000 favourable. Using the selling price of $50 for volume would give $5,000, which ignores that variable costs are saved, so it is wrong under marginal costing.

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