Part B

It is now three months after the budget process, and actual figures are available. You have prepared the following Income Statement as at 30 Sept 2014. 

Whilst you are pleased that Sales Quantity increased to 28,000 units, you are curious as to the causes of the resulting variances and had expected to see a higher Net profit result after the effort put in by marketing to increase sales.

Required

Task 1

Prepare a performance report based on budgeted and actual results. You will need to separate some expenses into fixed and variable components. Ignore opening and closing stock. Use F or U to denote whether each variance in the reports is favourable or unfavourable.

Expand the Performance report so you also have this in flexible budget format. 

Task 2

Comment on price and usage variances for direct materials and direct labour and include these in your answer and analysis. A detailed answer is required and you should refer to both the Performance report as well as the Flexible budget format. 

Task 3

Identify 2 Fixed expense items that have a significant variance. Suggest a possible reason the variances have occurred.