ACCA Applied Knowledge · Management Accounting · Variance calculations and analysis
Marlow Co uses marginal costing for variance analysis. Budgeted sales were 5,000 units with a standard selling price of $40 and a standard variable cost of $24 per unit. Actual sales were 5,400 units. What is the sales volume contribution variance?
The sales volume contribution variance is $6,400 favourable. Sales exceeded budget by 400 units, and each unit carries a standard contribution of $16 (selling price $40 less variable cost $24), so extra contribution is 400 times 16.
- A$6,400 favourableCorrect
- B$16,000 favourable
- C$8,640 favourable
- D$6,400 adverse
Explanation
Standard contribution per unit = 40 - 24 = $16. Volume difference = 5,400 - 5,000 = 400 units favourable. Variance = 400 x 16 = $6,400 favourable. Using the selling price of $40 would give $16,000, which ignores variable costs.
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