Variance (marginal costing) Task 3 MV Co uses standard costing for its product the C44. The cost card for the product C44 is shown below. Sales price Direct material Direct labour Variable overhead Fixed overheads Profit 8 kg @ 3 hrs @ 3 hrs @ 3 hrs @ $9 per kg $20 per hour $6 per hour $10 per hour $ 400 -72 -60 -18 -30 220 18 000 units of the C44 were budgeted to be produced and sold during the year, but were produced and sold. Sales revenue was $7 250 000 Actual labour hours were 18 500 54 800 Required: (a) Calculate the sales volume variance using marginal costing, stating whether it is favourable or adverse. (b) Calculate the sales price variance, stating whether it is favourable or adverse. (c) Calculate the difference between the fixed overhead expenditure variance using absorption costing and the fixed overhead expenditure variance using marginal costing. (d) Calculate the fixed overhead capacity variance using absorption costing, stating whether it is favourable or adverse. (e) Calculate the fixed overhead efficiency variance using absorption costing, stating whether it is favourable or adverse. (f) Which of the following is most likely to result in an adverse sales price variance? (0) More customers than expected taking advantage of early payment discounts (ii) MV Co running out of inventory during the year (iii) Worldwide recession shrinking the overall market for the C44 (iv) Competitors reducing their prices Variance (marginal costing) Task 3 MV Co uses standard costing for its product the C44. The cost card for the product C44 is shown below. Sales price Direct material Direct labour Variable overhead Fixed overheads Profit 8 kg @ 3 hrs @ 3 hrs @ 3 hrs @ $9 per kg $20 per hour $6 per hour $10 per hour $ 400 -72 -60 -18 -30 220 18 000 units of the C44 were budgeted to be produced and sold during the year, but were produced and sold. Sales revenue was $7 250 000 Actual labour hours were 18 500 54 800 Required: (a) Calculate the sales volume variance using marginal costing, stating whether it is favourable or adverse. (b) Calculate the sales price variance, stating whether it is favourable or adverse. (c) Calculate the difference between the fixed overhead expenditure variance using absorption costing and the fixed overhead expenditure variance using marginal costing. (d) Calculate the fixed overhead capacity variance using absorption costing, stating whether it is favourable or adverse. (e) Calculate the fixed overhead efficiency variance using absorption costing, stating whether it is favourable or adverse. (f) Which of the following is most likely to result in an adverse sales price variance? (0) More customers than expected taking advantage of early payment discounts (ii) MV Co running out of inventory during the year (iii) Worldwide recession shrinking the overall market for the C44 (iv) Competitors reducing their prices