Scarlet Ltd is a mobile phone manufacturing company. The static budget for the month ended 31 January is given below:

The actual data for January is given below:

Required
1. Prepare a flexible budget performance report using the number of mobile phones produced as the base.
2. Calculate the standard machine-hours allowed for the actual production. Determine the standard variable overhead cost per machine hour for the following.
(a) Indirect labour
(b) Power
(c) Lubricant
3. Prepare the variable overhead performance report of Scarlet Ltd using the machine-hours as the basis. Include the following variances in the report:
(a) Spending variance for variable overhead
(b) Efficiency variance for variable overhead
(c) Total variance for variable overhead

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Scarlet Ltd Static budget for the month ended 31 January Budgeted production of mobile phones (in units) Budgeted machine-hours Budgeted variable overhead costs: Indirect labour (80% of total indirect labour) Power Lubricant Total variable overhead cost Budgeted fixed overhead costs: Indirect labour (20% of total indirect labour) Supervisory salaries Insurance Utilities (excluding power) Depreciation Total fixed overhead cost 20,000 80,000 £24,000 48,000 20,000 £92,000 £6,000 50,000 5,000 5,000 15,000 £81,000