Singleton has been operating for some years as a manufacturer of a single product, and after several years’ growth has decided to form a company Singleton Ltd. His accountant advised him that in an increasingly competitive world he really should achieve greater financial control of his business, and to assist Singleton in this objective the accountant prepared a simple manufacturing budget for the financial year ending 31 August 2012. The following schedule provides the detail of the budget and the actual results for the year ended 31 August 2012. The actual results have been extracted from the ledger as at that date without any adjustments made. Budget Actual £ £ Raw materials consumed 80,000 90,000 Factory rent 10,000 12,500 Factory maintenance expenses 6,700 6,100 Heating and lighting 2,900 3,000 Direct labour wages 120,000 110,500 Direct expenses 5,800 6,000 Depreciation of plant and machinery 8,900 10,500 Wages, maintenance labour 18,000 24,000 Other factory overheads 12,700 9,600 Additional information: 1 At 31 August 2012 the following amounts were still owing: £ Direct labour wages 5,100 Heating and lighting 900 Other factory overheads 400 2 The factory rent paid covered the period from 1 September 2011 to 30 November 2012. 3 During the year the firm sold 90,000 units of its product at £4.50 a unit. 4 There was no work in progress. The inventories of finished goods were: £ 1 September 2011 28,900 31 August 2012 35,000 Required:

(a) What is variance analysis and how can it contribute to the operating efficiency of Singleton’s business? (b). For the year ended 31 August 2012 prepare: (i) A manufacturing account and a schedule of the relevant variances; (ii) A trading account.

(c) Write a report to advise Singleton whether the principles of budgeting can be applied to: (i) Non-manufacturing costs; (ii) The control of cash resources. Your report should indicate in each case the potential benefits that the firm could achieve through extending its use of budgeting. . (AQA (Associated Examining Board): GCE A-level)