The marketing director of W Limited is dissatisfied with the variances reported to him on the basis of actual costs being compared with a fixed budget for the costs attributed to the marketing function. He seeks your help and asks you to prepare for him a flexible budget for the calendar year 1987, based on the following information which is stated for an estimated sales level of £10 million unless stated otherwise.

You are required to:

(a) Prepare a flexible budget for sales levels of £9 million, £10 million, and £11.5 million.

(b) Calculate the total marketing cost allowance, assuming sales of £10.75 million.

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Fixed costs: Salaries: Sales representatives Sales office Salary-related costs Rent Depreciation of furniture Depreciation of cars Insurance Advertising 000 200 60 32 100 5 67 20 250