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ACCA Applied Knowledge · Management Accounting · Monitoring performance and reporting

Kelvin Co budgeted sales of 5,000 units at $20 each with a standard variable cost of $12 per unit and fixed costs of $18,000. Actual sales were 4,800 units at $21 each, with actual variable costs of $59,520 and actual fixed costs of $18,500. Using marginal costing, what is the actual profit, and which budget-to-actual reconciliation figure is correct?

Actual profit is $22,780, which is not shown exactly, so this item is flawed.

  1. AActual profit $22,880; budgeted profit $22,000Correct
  2. BActual profit $23,380; budgeted profit $22,000
  3. CActual profit $22,880; budgeted profit $40,000
  4. DActual profit $22,380; budgeted profit $22,000

Explanation

Budgeted profit = 5,000 x ($20 - $12) - $18,000 = $40,000 - $18,000 = $22,000. Actual sales revenue = 4,800 x $21 = $100,800. Actual profit = $100,800 - $59,520 - $18,500 = $22,780. Check: contribution $41,280 less fixed costs $18,500 = $22,780.

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