Bradley-Allen Ltd makes one standard product. Its budgeted operating statement for May is as follows:

£ £

Sales (volume and revenue): 800 units 64,000 Direct materials: Type A (12,000)

Type B (16,000)

Direct labour: Skilled (4,000)

Unskilled (10,000)

Fixed overheads: (All fixed) (12,000)

(54,000)

Budgeted operating profit 10,000 Exerci ses 537 The standard costs were as follows:

Direct materials: Type A £50/kg Type B £20/m Direct labour: Skilled £10/hour Unskilled £8/hour During May, the following occurred:

1 950 units were sold for a total of £73,000.

2 310 kilos (costing £15,200) of type A material were used in production.

3 920 metres (costing £18,900) of type B material were used in production.

4 S killed workers were paid £4,628 for 445 hours.

5 Unskilled workers were paid £11,275 for 1,375 hours.

6 Fixed overheads cost £11,960.

There were no inventories of finished production or of work in progress at either the beginning or end of May.

Required:

(a) Prepare a statement that reconciles the budgeted to the actual profit of the business for May, through variances. Your statement should analyse the difference between the two profit figures in as much detail as you are able.

(b) Explain how the statement in

(a) might be helpful to managers.

AppendixLO1