QUESTION 4  Budgeting, flexible budgets & variances

Len's Kayaks manufactures one type of fishing kayak.. The following is their static budget for the year ended 30th June 2020:

Len’s Kayaks actual results to 30th June 2020 were:

Required

i. Based on the static budget alone, what is the contribution per unit? How many units would Len’s Kayaks need to sell to break even in the year to 30th June 2020?

ii. Compare the Static Budget and Actual results for the year to 30th June 2020 for Len’s Kayaks and calculate all appropriate variances for the year (show all workings).

iii. Prepare a reconciliation of the Static-budget operating profit and the Actual profit for Len’s Kayaks for the year ended 30th June 2020. See Table 12-4 of the text 3 rd edition (reproduced below) as the exemplar format to use. You will need to make changes to the format to suit the business e.g. only one category of direct material compared to Webb Ltd, two categories for variable overhead variances (spending and efficiency) and one for fixed overhead spending variance (no production volume variance as not using a fixed overhead rate) and you need to decide whether your calculated variances are favourable or unfavourable.