Professional Documents
Culture Documents
Cement PLC manufactured 10,000 bags of cement during the month of January. Following raw
materials were purchased and consumed by Cement PLC during the period:
Material Quantity Actual Price Standard Price
Revenue 20 50
Direct labor 5 10
Direct Material 6 15
Variable Overheads 4 10
Fixed Overheads 2 5
Wrangler Plc uses marginal costing to prepare its operating statement.
Step 1: Calculate the standard contribution per unit
Trousers Jackets
$ $
Revenue 20 50
Direct labor (5) (10)
Direct Material (6) (15)
Variable Overheads (4) (10)
Adverse sales volume variance indicated a lower standard profit or contribution than the budgeted
profit or contribution.
Causes for an adverse sales volume variance include:
Adverse sales quantity variance (i.e. lower total number of units sold than budgeted)
Favorable sales volume variance can be achieved in case of a favorable sales mix variance even if
the total number of units of all products sold during the period are lower than the total budgeted units
(and vice versa).
It is therefore important to investigate the sales volume variance by analyzing it further into sales
quantity and sales mix variances in case where an organization sells more than one product.
Sales Mix Variance
Aliengear Inc. is a small company that specializes in the manufacture and sale of gaming computers.
Currently, the company offers two models of gaming PCs:
Speedo - An entry level gaming PC with standard fan cooling priced at $1,000
Aliengear budgeted sales of 1,600 units of Turbox and 2,400 units of Speedo in the last year. The
standard variable costs of a single unit of Turbox and Speedo were set at $1,500 and $750
respectively.
The sales team at Aliengear managed to sell 1,300 units of Turbox and 3,700 units of Speedo during
the last year.