If a company has a budgeted contribution margin of $200,000 and an actual contri

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Question: If a company has a budgeted contribution margin of $200,000 and an actual contribution margin of $180,000, what is the contribution margin variance?

Options:

$20,000 Favorable
$20,000 Unfavorable
$40,000 Favorable
$40,000 Unfavorable

Correct Answer: $20,000 Unfavorable

Solution:

Contribution Margin Variance = Actual Contribution Margin - Budgeted Contribution Margin = $180,000 - $200,000 = -$20,000 (Unfavorable)

If a company has a budgeted contribution margin of $200,000 and an actual contri

Practice Questions

If a company has a budgeted contribution margin of $200,000 and an actual contribution margin of $180,000, what is the contribution margin variance?

$20,000 Favorable
$20,000 Unfavorable
$40,000 Favorable
$40,000 Unfavorable

Questions & Step-by-Step Solutions

If a company has a budgeted contribution margin of $200,000 and an actual contribution margin of $180,000, what is the contribution margin variance?

Step 1: Identify the budgeted contribution margin, which is $200,000.
Step 2: Identify the actual contribution margin, which is $180,000.
Step 3: Use the formula for contribution margin variance: Actual Contribution Margin - Budgeted Contribution Margin.
Step 4: Substitute the values into the formula: $180,000 - $200,000.
Step 5: Calculate the result: $180,000 - $200,000 = -$20,000.
Step 6: Determine if the variance is favorable or unfavorable. Since the result is negative, it is unfavorable.

Contribution Margin – The contribution margin is the difference between sales revenue and variable costs, indicating how much revenue is available to cover fixed costs and generate profit.
Variance Analysis – Variance analysis involves comparing budgeted figures to actual figures to assess performance and identify areas for improvement.

If a company has a budgeted contribution margin of $200,000 and an actual contri

What’s inside this PDF?

If a company has a budgeted contribution margin of $200,000 and an actual contri

Practice Questions

Questions & Step-by-Step Solutions

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