ICAEW BIP · Chapter 9 · Question 9 of 13
Budgeted sales were 5,000 units and actual sales were 4,600 units. The standard contribution is £22 per unit and the standard profit is £14 per unit. If the company uses marginal costing, what is the sales volume variance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) £8,800 adverse
Explanation
Sales volume fell short of budget by 5,000 - 4,600 = 400 units. Under marginal costing the variance is valued at standard contribution: 400 x £22 = £8,800 adverse. Under absorption costing it would be valued at standard profit (£5,600).
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