Lecture 8 - Standard costing and variance analysis (2)

Question 1

Fixed overhead expenditure or spending variance calculation:

Answer 1

The difference between the budgeted fixed
overheads (BFO) and the actual fixed
overhead (AFO) spending:

BFO – AFO

Question 2

Sales margin price variance can be calculated as:

Answer 2

(AP- SP) x AQ

AP: actual selling price
SP: standard selling price
AQ: actual sales quantity

Question 3

Sales Margin Volume Variance can be calculated as:

Answer 3

(AQ – SQ) x SM

• AQ = Actual sales volume
• SQ = Standard sales volume
• SM = Standard contribution margin

Question 4

Total Sales Margin Variance is calculated as:

Answer 4

(ASR – SCOS) – SC

ASR: actual sales revenues (AP x AQ)
SCOS: standard variable cost of sales (SCOS/unit x AQ)
SC: budgeted contribution (SM/unit x SQ)

Question 5

Causes of sales margin variances:

Answer 5

• Poor standards
• Product/Service quality
• External factors beyond managements control