Page 136 - BA2 Integrated Workbook STUDENT 2018
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Chapter 7
Analysing variances
3.1 Reconciling actual contribution with budgeted contribution
A reconciliation statement, known as an operating statement, begins with the
original budgeted contribution. It then adds the favourable variances and subtracts
the adverse variances to arrive at the actual contribution for the month.
Continuing with our XYZ example, we can produce the following operating statement.
$ $ $
Budgeted contribution (2,000 × $60) 120,000
Sales volume contribution variance 6,000 F
————
Standard contribution from actual sales volume 126,000
Sales price variance 15,000 A
————
111,000
Cost variances: Fav Adv
Direct material price 11,250
Direct material usage 10,500
Direct labour rate 15,000
Direct labour efficiency 10,000
Variable overhead expenditure 800
Variable overhead efficiency 3,000
———— ————
Total cost variances 25,050 25,500 450 A
————
Actual contribution 110,550
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