. Advanced: Sales mix and quantity variances. BRK Co operates an absorption costing system and sells three...
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Question:
The budgeted fixed production overhead for the last period was £81 000. This was absorbed on a machine-hour basis. The standard machine hours for each product and the budgeted levels of production and sales for each product for the last period are as follows:
Actual volumes and selling prices for the three products in the last period were as follows:
Required:
a Calculate the following variances for overall sales for the last period:
(i) sales price variance;
(ii) sales volume profit variance;
(iii) sales mix profit variance;
(iv) sales quantity profit variance and reconcile budgeted profit for the period to actual sales Jess standard cost.
b Discuss the significance of the sales mix profit variance and comment on whether useful information would be obtained by calculating mix variances for each of these three products.
c Describe the essential elements of a standard costing system and explain how quantitative analysis can assist in the preparation of standard costs.
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