1. Aferwych Ltd manufactures parts that are used as components by car manufacturers.

All of their materials are imported.

The following information from last year is shown below:

	Budget	Actual
Actual	375,000	350,000
	000s	000s
Sales	28,125	28,000
Variable Costs
Materials	5,625	5,600
Labour	1,875	1,575
Distribution	1,125	1,085
Total Variable Costs	8,625	8,260
Contribution	19,500	19,740
Fixed Costs
Quality control	210	170
Premises	4,000	4,120
Administration	2,500	2,400
Total Fixed Costs	6,710	6,690
Operating Profit	12,790	13,050

Required:

Prepare a summary that shows the variances, discusses possible reasons for the variances, and in the case of adverse variances, how they might be avoided in future. Max. words 300