Page 105 - BA2 Integrated Workbook - Student 2017

Budgeting

6.4 Reconciling actual contribution and budgeted contribution.

We can use the variances calculated to reconcile the actual contribution with the
budgeted contribution for the period.

Example

A company has a budgeted contribution for the period of $25,000. The following
variances were calculated for the period:

Direct material total variance $2,500 adverse

Direct labour total variance $1,500 favourable

Variable production overhead total variance $1,900 favourable

The actual contribution for the period can be calculated by adding the favourable
variances and deducting the adverse variances from the budgeted contribution.

$
Budgeted contribution 25,000
Direct material total variance (2,500)
Direct labour total variance 1,500
Variable production overhead total variance 1,900
–––––––
Actual contribution 25,900
–––––––

97