Brive plc has the following standards for its only product:

Selling price: £110/unit Direct labour: 12 hour at £21.00/hour Direct material: 3 kg at £14.00/kg Fixed overheads: £27.00/unit, based on a budgeted output of 800 units/month During May, there was an actual output of 850 units and the operating statement for the month was as follows:

£

Sales revenue 92,930 Direct labour (445 hours) (9,665)

Direct materials (2,410 kg) (33,258)

Fixed overheads (21,365)

Operating profit 28,642 There were no inventories of any description at the beginning and end of May.

Required:

Prepare the original budget and a budget flexed to the actual volume. Use these to compare the budgeted and actual profits of the business for the month, going into as much detail with your analysis as the information given will allow.

AppendixLO1