Skip to content

CA Intermediate · Cost and Management Accounting · Standard Costing

Sundaram Foods budgeted 10,000 units at a standard selling price of Rs 100 and standard cost of Rs 70 per unit. Actual sales were 9,000 units at Rs 104. Actual cost per unit was Rs 74. Using the standard profit per unit for volume, what is the sales margin price variance and the sales margin volume variance respectively?

The sales margin price variance is Rs 36,000 favourable and the volume variance is Rs 30,000 adverse. Price is Rs 4 above standard on 9,000 units. Volume is 1,000 units short of budget, valued at the standard profit of Rs 30 per unit.

  1. ARs 36,000 Favourable and Rs 30,000 AdverseCorrect
  2. BRs 40,000 Favourable and Rs 30,000 Adverse
  3. CRs 36,000 Favourable and Rs 36,000 Adverse
  4. DRs 36,000 Favourable and Rs 40,000 Adverse

Explanation

Sales margin price variance = (104 - 100) x 9,000 = Rs 36,000 F. Sales margin volume variance = (9,000 - 10,000) x standard profit Rs 30 = Rs 30,000 A. Option B uses 10,000 units for price, which is the wrong base; the actual quantity must be used. The cost increase of Rs 4 is a cost variance and does not enter these two.

Did you get it right without looking?

One question tells you little. A timed set on Standard Costing shows your real accuracy, how long you take and where you lose marks.

Practise Standard CostingFree diagnostic mock

More Standard Costing questions