A company manufactures and sells one product. At the end of the year, the managers were disappointed that the profit had decreased. The details are:-

BUDGET ACTUAL

Sales 1 200 units 36 000 1 000 units 40 000

Material (variable cost) 500 kg 3 000 500 kg 3 600

Labour (variable cost) 1 200 hours 12 000 1 100 hours 12 100

Fixed overheads 9 000 7 000

Total costs 24 000 22 700

Profit / (Loss) 12 000 17 300

(a) Calculate the following variances:_

1. Material price and usage
2. Labour rate and efficiency
3. Overhead spending and volume
4. Sales volume and price

(b) Prepare a report to explain the difference between the expected profit of 12 000 and the actual reported profit of 22 700 for the year.

2. Discuss the reports that should be provided to the managers of:-
   1. cost centres
   2. profit centres
   3. investment centres