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
(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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