Division A of the Wye Group manufactures one product and when operating at $100 \%$ capacity can produce 5,000 units per period, but for the last few periods has been operating below capacity.

Below is the flexible budget prepared at the start of last period, for three levels of activity at below capacity:

In the event, the last period turned out to be even worse than expected, with production of only 2,500 units. The following costs were incurred:

Required:

Use the information given above to prepare the following.

(a) A flexed budget for 2,500 units.

(b) A budgetary control statement.

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Level of activity (units) 3,500 4,000 4,500 $ $ $ Direct materials 7,000 8,000 9,000 Direct labour 28,000 32,000 36,000 Production overheads 34,000 36,000 38,000 Administration, selling and distribution overheads 15,000 15,000 15,000 Total cost 84,000 91,000 98,000