Bedford Ltd is a manufacturing business with several production departments. Benjamin Kent, the manager of the machining department, submitted the following figures for the firm's annual budget for his department:

Units produced (normal production level) 64,000

£

Raw materials 294,400 Direct labour 236,800 Power 38,400 Repairs and maintenance ( $25 \%$ variable at this level of budgeted cost) $\quad 51,200$

Insurance 1,300 Heating and lighting 1,250 Indirect wages ( $15 \%$ variable at this level of budgeted cost)

64,000 Total cost

$\underline{\underline{687,350}}$

Total capacity for machining department 80,000 units Actual production for the period is 68,000 units, and costs are:

Materials 310,750 Labour 249,100 Power 39,800 Repairs and maintenance 53,050 Insurance 1,350 Heating and lighting 1,200 Indirect wages 65,250 Total cost

$\underline{720,500}$

Benjamin is being criticised for overspending $£ 33,150$ compared with his normal budget. It is appreciated that he has made a saving on heating and lighting, but concern is being expressed over the spending on materials and labour. Benjamin feels that he has been able to control the department's costs efficiently.

\section*{Required:}
A. Construct a flexible budget for $60 \%, 70 \%, 75 \%, 85 \%$ and $90 \%$ of production capacity, calculate any savings or overspending by Benjamin's department and comment on its efficiency.
B. Describe the operation of an efficient system of budgetary control.
(Reproduced with the kind permission of OCR - University of Oxford Delegacy of Local Examinations: GCE A-level)