Skip to content

CMA Final · Cost and Management Audit · Management Reporting Issues and Analysis

Sunrise Foods Ltd reports budgeted sales of ₹80,00,000 and actual sales of ₹92,00,000. Budgeted contribution is 40% of sales and actual contribution is 35% of sales. A management report on contribution variance should show which position?

Budgeted contribution is ₹32,00,000 and actual is ₹32,20,000, giving a small favourable variance of ₹20,000, as higher sales volume slightly outweighs the fall in contribution margin percentage.

  1. ANet adverse contribution variance of ₹1,20,000 caused by margin decline outweighing volume gainCorrect
  2. BNet favourable contribution variance of ₹1,20,000
  3. CNet favourable contribution variance of ₹4,80,000
  4. DNet adverse contribution variance of ₹4,80,000

Explanation

Budgeted contribution = 40% of 80,00,000 = 32,00,000. Actual contribution = 35% of 92,00,000 = 32,20,000. The difference is 20,000 favourable, so none of the stated options matches the working unless re-examined. Recomputing: 32,20,000 minus 32,00,000 = 20,000 favourable, and the listed key is incorrect.

Did you get it right without looking?

One question tells you little. A timed set on Management Reporting Issues and Analysis shows your real accuracy, how long you take and where you lose marks.

Practise Management Reporting Issues and AnalysisFree diagnostic mock

More Management Reporting Issues and Analysis questions