ExpertEasy2 marksShort Answer
ACCA · Question 29 · Standard Costing
A consulting firm uses standard absorption costing. The budgeted sales volume was 10,000 billable hours. The actual sales volume achieved was 9,500 billable hours. The standard profit per billable hour is $8.
Calculate the sales volume profit variance. State your answer as a number followed by 'A' or 'F' (e.g., 4000 A).
A consulting firm uses standard absorption costing. The budgeted sales volume was 10,000 billable hours. The actual sales volume achieved was 9,500 billable hours. The standard profit per billable hour is $8.
Calculate the sales volume profit variance. State your answer as a number followed by 'A' or 'F' (e.g., 4000 A).
How to approach this question
1. Find the difference between budgeted volume and actual volume. 2. Multiply the difference by the standard profit per unit.
Full Answer
Difference in volume = 10,000 budgeted - 9,500 actual = 500 hours shortfall.
Since actual volume is less than budgeted, the variance is Adverse.
Variance = 500 hours × $8 standard profit = $4,000 Adverse.
Common mistakes
Using standard contribution instead of standard profit (which would be the marginal costing approach).
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