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Compute the contribution margin volume variance

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Reference no: EM133130028

Question - The Company SanInvest is dedicated to the manufacture of Product F, having made the following forecasts for year N:

Sales

300 tonnes X 1.000€

300.000€

Direct Materials Used

600 tonnes X 250€

150.000€

Conversion Costs

4.500 MH X 10€

45.000€

Total Contribution Margin

105.000€

Fixed Costs

40.000€

Profit Before Taxes (PBT)

65.000€

However, forecasts did not materialize, as sales increased to 400 tonnes and profit before taxes unexpectedly declined to 34.000€.

Required -

1. Compute the contribution margin volume variance. Show calculations and explain the variance meaning.

2. Knowing that the actual value of the consumption of the materials was 234.000 € and that its actual unit cost was 260 € per tonne, what is the usage (volume) variance of the materials? Support your answer with calculations.

3. Knowing the price variance of the conversion costs is zero and that the efficiency (volume) variance is favorable in 8.000€, calculate the number of machine hours actually consumed.

4. Point out one possible cause that explains the favorable efficiency (volume) variance in conversion costs.

5. Knowing that the actual Fixed Costs were 40.000€, what is the variance that had more influence (in terms of absolute value - not percentage) on the profit before taxes the company actually achieved in year N? Calculate the value of this variance.

Reference no: EM133130028

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