Engines Incorporated, a small engineering company, has the following results for April 2002 for its product, the Widget. It budgeted to sell 12,500 widgets at £9.00 each. However, 16,000 widgets were actually sold at £8.80 each. The budgeted and actual costs are given below.

Budget Actual Number of widgets 12,500 16,000 if £

Price per widget 9.00 8.80 Direct materials 40,000 42,000 Labour cost 32,000 29,000 Variable overheads 6,000 8,000 Fixed overheads 8,000 10,000 Required:

(i) Calculate the flexed budget.

(ii) Calculate the sales price and sales quantity variances.

(iii) Calculate the overall cost variances for materials, labour, variable overheads and fixed overheads (note: you do not have enough information to calculate the more detailed price and quantity variances).

(iv) Discuss the variances. In particular, highlight what extra information might be needed.