Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 27

Chapman, Inc., sells a single product, Zud, which has a budgeted selling price of $24 per unit and a budgeted variable cost of $12 per unit. Budgeted fixed costs for the year amount to $45,000. Actual sales volume for the year (47,000) fell 3,000 units short of budgeted sales volume. Actual fixed costs were $46,000. With everything else held constant, what impact did the shortfall in volume have on profitability for the year?

Step 1 of 4

The manufacturing process includes different types of costs which includes fixed costs and variable costs. It includes costs related to raw material, direct labor and direct manufacturing overheads. When variable costs are deducted from the sales price then it is called as contribution.