ABC Ltd. manufactures chairs and sells them through several retail chains. Early in August, senior managers at this company received a variance analysis report identifying the deviation of its performance for the first half of the year from its budget. The president is concerned that their actual profit is lower than expected despite unit sales being higher than budget. In the first six months, the cost of manufacturing and marketing at the companys forecasted volume of 10,000 units PER MONTH was as follows:

Variable materials (50,000 kg of materials) 200,000

Variable labour (15,000 labour hours) 300,000

Fixed overhead 100,000 Selling price (per unit) 70

Construct the master and flexible budgets to compare them with the actual performance: The actual income statement in the first six months was as follows at the volume of 78,000 units.

Sales revenue Costs:4,680,000

Variable materials (429,000 kg of materials) 1,930,500

Variable labour (124,800 labour hours)1,996,800

Fixed overhead 600,000. 4,527,300

Profit 152,700