CA Intermediate · Cost and Management Accounting · Standard Costing
Standard sales of a firm were 2,000 units at a standard selling price of Rs 100 and a standard cost of Rs 70 per unit. Actual sales were 1,800 units at Rs 104 per unit. What is the sales margin volume variance, using the standard profit per unit?
The sales margin volume variance is Rs 6,000 Adverse. Actual sales were 200 units below the budget of 2,000 units, and each unit carried a standard profit of Rs 30, so the shortfall in profit is Rs 6,000.
- ARs 6,000 AdverseCorrect
- BRs 6,000 Favourable
- CRs 20,000 Adverse
- DRs 7,200 Favourable
Explanation
Standard profit per unit = 100 - 70 = Rs 30. Volume variance = (actual units 1,800 - budgeted units 2,000) x 30 = Rs 6,000 Adverse. Rs 7,200 Favourable relates to the price effect (1,800 x 4), which is the selling price variance, not volume.
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