Self-test Francis & Co. prepared a monthly budget for its production and found that there was a 10 per cent reduction in the amount produced.

A flexed budget was prepared and, based on that, the actual profit achieved was £1,800 greater than the flexed budget amount of profit.

Francis & Co. nevertheless decided to investigate all the variances to determine the reasons for the profit increase and to ascertain if there were areas that required further control.
Budget Flexed budget Actual Number of units 2,000 units 1,800 units 1,800 units Direct material £80,000 £72,000 £73,800 Direct labour £40,000 £36,000 £35,000 Fixed overheads £40,000 £40,000 £41,400 Profit £40,000 £32,000 £33,800 Sales £200,000 £180,000 £184,000 Material used 80,000 metres 72,000 metres 74,000 metres Labour 5,000 hours 4,500 hours 4,300 hours You are required to calculate the following variances:
(i) Material usage and price variances.
(ii) Labour rate and efficiency variances.
(iii) Fixed overhead variance.
(iv) Sales price variance.
To check your answer, reconcile the variances calculated to the original budgeted profit.