The following static budget is provided: Per unit Total Sales $80 $880,000 Less

Question

The following static budget is provided:

Per unit Total
Sales $80 $880,000
Less variable costs:
Manufacturing costs 40 440,000
Selling and administrative costs 20 220,000

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Contribution margin $20 $ 220,000
Less fixed costs:
Manufacturing costs 79,000
Selling and administrative costs 100,000

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Total fixed costs 179,000

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Net income $ 41,000

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What will be the overall volume variance if 14,000 units are produced and sold?

$280,000 U
$101,000 F
$60,000 F
$0 F

Explanation / Answer

The Company sold 3,000 more units than budgeted (14,000- 880,000/80). So the overall volume variance is 3,000 times a contribution margin of 20 or 60,000F.

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