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ACCA Applied Knowledge · Management Accounting · Standard costing system

Keswick Co budgeted sales of 4,000 units at a standard selling price of $50 and a standard variable cost of $30 per unit. Actual sales were 4,300 units at $48 per unit. Using marginal costing, what are the sales price variance and sales volume contribution variance?

The sales price variance is $8,600 adverse and the sales volume contribution variance is $6,000 favourable. Price is 4,300 units times a $2 shortfall. Volume is 300 extra units multiplied by the standard contribution of $20 per unit, since marginal costing values volume at contribution, not revenue.

  1. APrice $8,600 adverse; volume $6,000 favourableCorrect
  2. BPrice $8,600 adverse; volume $15,000 favourable
  3. CPrice $8,600 favourable; volume $6,000 favourable
  4. DPrice $6,000 adverse; volume $8,600 favourable

Explanation

Price variance = 4,300 x ($48 - $50) = $8,600 adverse. Volume variance = (4,300 - 4,000) x standard contribution of $20 = $6,000 favourable. Using the $50 selling price instead of the $20 contribution would give $15,000, which ignores variable cost.

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