Page 120 - BA2 Integrated Workbook - Student 2017

Chapter 7

Check the actual contribution is correct:
$
Sales revenue 1,350,000
Direct material 146,250
Direct labour 845,000
Variable overheads 248,200
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Actual contribution 110,550
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3.2 Interpreting variances

It is important to be able to interpret variances and to try to understand what could
have caused them.

Consider our variances for XYZ:

Variance Amount Reason

Direct material price $11,250 F  Standard price set too high

 Lower quality material used

 Unexpected discounts available

Direct material usage $10,500 A  Standard usage set too low

 Lower quality material used

 Less skilled workers

 Theft

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