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ACCA Applied Knowledge · Management Accounting · Variance calculations and analysis

Zeta Ltd uses standard marginal costing. Budgeted sales were 2,000 units and actual sales were 2,150 units. The standard contribution is $12 per unit and the standard profit under absorption costing is $7 per unit. What is the sales volume variance in the marginal costing operating statement?

The sales volume variance is $1,800 favourable. Actual sales exceeded budget by 150 units, and under marginal costing the difference is valued at the standard contribution of $12 per unit, not at the absorption profit of $7 per unit.

  1. A$1,800 favourableCorrect
  2. B$1,050 favourable
  3. C$1,800 adverse
  4. D$25,800 favourable

Explanation

Under marginal costing the sales volume variance is valued at standard contribution per unit: (2,150 - 2,000) x $12 = $1,800 favourable. The $1,050 figure uses standard absorption profit, which is wrong for marginal costing. Sales exceeded budget, so the variance cannot be adverse.

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