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How does the timing of the materials price variance calculation matter? How do you decide the significance of a variance statistically? What causes a favorable labour rate variance and an adverse one? How is the fixed overhead variance analyzed under absorption costing? What is the materials mix and yield variance? What are planning and operational variances? How can variances be interdependent, and why does that matter? What are the limitations and criticisms of variance analysis and standard costing? How does variance analysis differ under marginal versus absorption costing? How do you calculate the fixed overhead capacity and efficiency variances?
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Budgeting & Forecasting › Variance Analysis

What is the difference between the sales volume variance valued at contribution versus profit?

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Answer

Under marginal costing, the sales volume variance is valued at standard contribution per unit (since fixed costs don't change with volume). Under absorption costing, it's valued at standard profit per unit (contribution less fixed overhead per unit). The choice reflects the costing system and affects the reported variance magnitude.
Real-world example The same volume shortfall shows a larger adverse variance when valued at profit than at contribution.

Common follow-ups: Which costing uses contribution? | Why does the valuation differ?

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All 38 Variance Analysis questions