Part 1B

Question 1

The statement of shareholders’ equity shows a

Answer 1

Reconciliation of the beginning and ending balances in shareholders’ equity accounts.

Question 2

While fair value generally describes the revenue a business would receive for a good if selling it on the open market, net realizable value is

Answer 2

The fair value is the amount a company can expect to receive for a product in the open market. Net realizable value (when talking about inventory) is the expected selling price less the costs associated with finishing, selling, and transporting the product.

Question 3

Sales Volume Variance

Answer 3

(ActualUnitsSold−BudgetedUnitsSold)×BudgetedContributionMarginperUnit.

Always use budgeted contribution margin — not actual

It measures the effect of change in units sold, not price.
If the question asks what is the effect on profit - use contribution margin; if it asks what is the difference in the sales dollars -use selling price. If it’s vague, assume the CMA wants you to use the contribution margin method — especially when paired with a flexible budget or operating income.
When using the flexible budget method to calculate sales volume variance, we look at:
SalesVolumeVariance=FlexibleBudgetOperatingIncome−StaticBudgetOperatingIncome