Comparison of absorption and marginal costing variancesYou have been provided with the following data for SAccounting methodVariances:Sales priceSales volumeFixed overhead expenditureFixed overhead volumeCategoryRequired:During September production and sales volume were as follows:1) Calculate:i)ii)iii)AbsorptionBudgetActual-1,900 adverse-4,500 adverse2,500 favorable-1,800 adverseSales10,0009,500for September:the standard contribution per unitthe standard profit per unitthe actual fixed overhead cost total.Marginal-1,900 adverse-7,500 adverse2,500 favorablen/aProduction10,0009,7002) Using the information presented above, explain why the different variances arecalculated depending upon the choice of marginal or absorption costing.

Under the absorption costing approach all the costs incurred for manufacturing a product will be…

You have been provided with the following data for S Accounting method Variances: Sales price Sales volume Absorption -1,900 adverse -4,500 adverse for September: Marginal -1,900 adverse -7,500 adverse

You have been provided with the following data for S Accounting method Variances: Sales price Sales volume Absorption -1,900 adverse -4,500 adverse for September: Marginal -1,900 adverse -7,500 adverse

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

Comparison of absorption and marginal costing variances
You have been provided with the following data for S
Accounting method
Variances:
Sales price
Sales volume
Fixed overhead expenditure
Fixed overhead volume
Category
Required:
During September production and sales volume were as follows:
1) Calculate:
i)
ii)
iii)
Absorption
Budget
Actual
-1,900 adverse
-4,500 adverse
2,500 favorable
-1,800 adverse
Sales
10,000
9,500
for September:
the standard contribution per unit
the standard profit per unit
the actual fixed overhead cost total.
Marginal
-1,900 adverse
-7,500 adverse
2,500 favorable
n/a
Production
10,000
9,700
2) Using the information presented above, explain why the different variances are
calculated depending upon the choice of marginal or absorption costing.

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Step 1: Absorption costing:

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Step 2: (1) Calculation of standard contribution per unit, standard profit per unit and actual fixed OH:

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Step 3: (2) Explain why different variances are based on choice of marginal or absorption costing:

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