Flexible budgets and variance analysis
A company has obtained the following information regarding costs and revenue for the past financial year:
Original budget:
|
Sales |
10 000 units |
|
Production |
12 000 units |
Standard cost per unit:
|
£ |
|
|
Direct materials |
5 |
|
Direct labour |
9 |
|
Fixed production overheads |
8 |
|
|
22 |
|
|
30 |
Selling price
Actual result:
|
Sales |
9750 units |
|
Revenue |
£325 000 |
|
Production |
11 000 units |
|
Material cost |
£65 000 |
|
Labour cost |
£ 100 000 |
|
Fixed production overheads |
£95 000 |
There were no opening stocks.
Required:
(a) Produce a flexed budget statement showing the flexed budget and actual result. Calculate the variances between the actual and flexed figures for the following:
(b) Explain briefly how the sales and materials variances calculated in (a) may have arisen.
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