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Anchorvale Electronics Limited manufactures and distributes transistors for electronics firms. In December 2014, Anchorvale required a bank loan and the bank manager insisted that Tracy

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Anchorvale Electronics Limited manufactures and distributes transistors for electronics firms. In December 2014, Anchorvale required a bank loan and the bank manager insisted that Tracy Miller, Anchorvale's president, prepare a budget for 2015. In January 2016, Anchorvale needed an additional loan and Miller asked her accountant to prepare a budget for 2016 to show the bank manager. Miller was concerned because Anchorvale's profit for 2015 was considerably less than the 2015 budget figure given to the bank and she knew that the bank manager would want to know why. As a first step in analyzing the differences, Miller copied the 2015 actual figures onto the 2015 bank budget form shown below and prepared the standard cost details shown below the budget form. Required: 1. Redraft the budget to show the 2015 static budget, flexible budget, actual, and variances from the flexible budget, with contribution margins separately identified. Note: See the standard cost details above. 2. Prepare a quantitative analysis to demonstrate to management the main causes for the variance from the flexible budget, as a basis both for taking corrective action and for explaining the variance from the static budget to the bank manager. 3. If expected 2016 operating results are similar to 2015, explain to the bank manager how much of the loan you would be able to repay from 2016 earnings. (Assume no changes in accounts receivable and accounts payable.) 4. If competition became intense in 2016 and Anchorvale was operating well below capacity at 85,000 units, explain with calculations the minimum bid you would make on an order for 10,000 units. 5. What changes to the management accounting and reporting system for Anchorvale Electronics would you propose

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