17.2 Darblay Harriett Ltd produces a single product – a wooden cabinet. The company’s budget for November 20X1 is as follows:

£

Sales: 2,000 units @ £19.50 39,000 Direct materials: 2,000 3 (2 metres 3 £2.00) (8,000)

Direct labour: 2,000 3 (1 hour 3 £6.00) (12,000)

Production overheads (10,000)

9,000 Selling and administrative overheads (3,000)

Net profit 6,000 Darblay Harriett Ltd does not absorb production overheads using an overhead absorption rate. It may be assumed that all of its overheads are fixed in nature.

If the company flexes its budget for 2,600 units, what will be the revised net profit figure?

a) £14,700

b) £8,700

c) £11,700

d) £17,700 The following information is relevant for questions 17.3 to 17.8:

Edwards and Sheerness Ltd is in the motor parts industry. Its budget for July 20X8 is as follows:

£

Sales: 2,500 units @ £29 72,500 Direct materials: 2,500 3 (3 kg 3 £3.00) (22,500)

Direct labour: 2,500 3 (1.5 hours 3 £4.40) (16,500)

Production overheads (17,000)

16,500 Other overheads (3,500)

Net profit 13,000 Edwards and Sheerness Ltd does not absorb production overheads using an overhead absorption rate. It may be assumed that all of its overheads are fixed in nature.

The company’s actual results for the month are as follows:

£

Sales: 2,650 units @ £28 74,200 Direct materials: 2,650 3 (2.8 kg 3 £3.30) (24,486)

Direct labour: 2,650 3 (1.7 hours 3 £4.20) (18,921)

Production overheads (16,900)

13,893 Other overheads (3,600)

Net profit 10,293