The High Definition LCD Division (HDLD) of Fisher Displays produces displays for HD LCD televisions. The displays are assembled from purchased components. The costs (value) added by HDLD are indirect costs, which include assembly labour, packaging and shipping. HDLD produces two sizes of displays: 42" and 50". Cost behaviour of HDLD is as follows:

Both displays require five components per display. Therefore, the total cost of components for 50" displays is ₤400 and for 42" displays is ₤275. HDLD uses a 6-month continuous budget that is revised monthly. Sales forecasts for the next 8 months are as follows:

Treat each event in succession.

1. Use spreadsheet software to prepare a table of budgeting information and an operating expense budget for HDLD for October–March. Incorporate the expectation that sales of 42" displays will be 125 per cent of 50" displays. Prepare a spreadsheet that can be revised easily for succeeding months in parts 2 and 3.

2. October’s actual sales were 2,800 50" displays and 3,600 42" displays. This outcome has caused HDLD to revise its sales forecasts downward by 10 per cent. Revise the operating expense budget for November–April.

3. At the end of November, HDLD decides that the proportion of 50" to 42" displays is changing. Sales of 42" displays are expected to be 150 per cent of 50" displays sales. Expected sales of 50" displays are unchanged from number 2. Revise the operating expense budget for December–May.

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Purchased components 50" Displays 42" Displays Assembly labour Packaging Shipping Fixed cost/month £40,000 8,000 8,000 Variable cost £80 per component 55 per component 16 per component 4 per display 2 per display