Criticism and redrafting of a performance report

(a) The following report has been prepared, relat- ing to one product for March. This has been sent to the appropriate product manager as part of PDC Limited's monitoring procedures.

The product manager has complained that the report ignores the principle of flexible budget- ing and is unfair. Required: Prepare a report addressed to the management team which comments critically on the monthly variance report. Include as an appen- dix to your report the layout of a revised monthly variance report which will be more useful to the product manager. Include row and column headings, but do not calculate the contents of the report. (15 marks)

(b) Explain the differences between budgetary control and standard costing/variance analy- sis. In what circumstances would an organiza- tion find it beneficial to operate both of these cost control systems? (5 marks) (Total 20 marks)

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Monthly variance report - March 1 Actual Budget Variance % Production 9905 10000 95 A 0.95 A volume (units) Sales volume 9500 10000 500 A 5.00 A (units) Sales revenue 27700 30000 2300 A 7.67 A ()