Advanced: Performance reports for sales and product managers Zits Ltd makes two models for rotary lawn mowers, the Quicut and the Powacut. The company has a sales director and reporting to her, two product managers, each responsible for the profit¬ ability of one of the two models. The company’s financial year ended on 31 March. The budgeted and actual results for the two models for the year ended on 31 March are given below:

The accountant had drawn up a series of flexed budgets at the beginning of the year should the actual volume differ from budget. The variable costs were unchanged, but the budgeted fixed costs, assuming a constant sales mix, for the different output ranges were as given below:

The sales director has just received information from the trade association that industry rotary lawn mower sales for the twelve months ended on 31 March were 1.3 million units as against a forecast of 1.0 million.
Requirements:

(a) Prepare a schedule of variances which will be helpful to the sales director, and a schedule of more detailed variances which will be appro¬ priate to the two product managers who are treated as profit centres. (16 marks)

(b) Discuss the results scheduled in

(a) above identifying which of the variances are plan¬ ning and which are operating variances.
(9 marks) (Total 25 marks) ICAEW Management Accounting

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Quicut Powacut Total Budget Actual Budget Actual Budget Actual Sales volume (000 units) 240 280 120 110 360 390 (000) (000) (000) (000) (000) (000) Sales revenue 28 800 32 200 24 000 24 200 52 800 56 400 Costs: Variable 9 600 11 480 7 200 6 820 16 800 18 300 Traceable fixed 8 200 7 600 6 800 6 800 15 000 14 400 manufacturing Period costs: Manufacturing Administration and selling Net Profit before Tax 5 700 6.000 4.300 4 500 41 800 11.000 43 200 13 200