$11\mathrm{.}5$ Sencam Designs manufactures exclusive furniture. Results have been disappointing in recent years, and a new managing director, Nayshia Woods, was appointed to raise production volumes. After an initial assessment, she considered that budgets had been set at levels which were easy for employees to achieve. She argued that employees would be better motivated by setting budgets which challenged them more in terms of higher expected output.

Cost and Management Accounting

Other than changing the overall budgeted output, Ms Woods has not yet altered any part of the standard cost card which appears below:

$\backslash$table$[[,,R$

The finance director suggested that an absorption costing system is misleading and the company should consider adopting a marginal costing system at some stage in the future to guide decision making.

Required:

$($a$)$ Calculate all possible operating variances.

$($b$)$ Reconcile the budgeted and actual profit for the month for Sencam Designs.

$($c$)$ Examine the impact of the operational changes made by Ms Woods on the profitability of the company. In your answer, consider the following:

$($i$)$ Motivation and budget setting

$($ii$)$ Possible causes of variances.

$($d$)$ Reconcile the budgeted and actual profit for the month if the company were to change to the marginal costing system.