Question

2.        A food product company, manufacturer two products: 'Petrol' and Oil'. The Information related to...

2.        A food product company, manufacturer two products: 'Petrol' and Oil'. The Information related to Sales during the last period is as follows:

Petrol               Oil      

Budgeted Sales                                                         8, 000                     4 000

Actual Sales                                                                    6, 000                     7,000

Standard Costs and revenues per unit of Petrol and Oil are as follows:

                                                                                                Petrol                           Oil

Sales                                                                                       18 per Unit                            10 liters 600 SAR

Direct Material                                                                    5 Per Unit                             10 liters 200 SAR

Direct Labor                                                                         2 Per Unit                             10 liters 100 SAR

Variable Overhead                                                              3 Per Unit                              10 liters 50 SAR

Fixed Overhead                                                                   2 Per unit                             10 liters 20 SAR

You are required to find:

(a)    Sales Volume Variance where the company is using Marginal Costing system

(b)    Sales Volume Variance where the company is using Absorption Costing system

Homework Answers

Answer #1

(a)    Sales Volume Variance where the company is using Marginal Costing system :

   Sales Volume Variance = (Actual Sales - Budgeted sales ) * Standard Contribution per unit

Petrol = ( 6,000 - 8,000) * ( 18 - {5+2 +3})

= ( 6,000 - 8,000) * 8

= 16,000 (U)

Oil = (7,000 - 4,000) * ({600 - (200+100+50)})

= (3,000) * (250)

= 7,50,000 (F)

(b)    Sales Volume Variance where the company is using Absorption Costing system

Sales Volume Variance = (Actual Sales - Budgeted sales ) * Standard Profit per unit

Petrol = (6,000 - 8,000) * (18 - 12)

= 12,000 (U)

Oil = (7,000 - 4,000) * (600 - 370)

= 6,90,000 (F)

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