Determine all the relevant variances for both products in South division. (12 Marks) and Explain how a flexible budget can improve variance analysis in a control system. (6 Marks)

The South Division produces and sells two products ('P' and 'Q') which both require the same grade of labor and raw materials. The division manager declares that the division's most recent financial year has been disappointing, and he has provided you with what he considers to be the important financial indicators of the division's performance, as follows: Budget Actual ($) ($) Sales 1,874,000 1,584,320 Net profit 277,000 143,440 The division manager has said he is "determined to look on the bright side... sales exceeded the 1.5m barrier even though the total market shrank in size, nevertheless our division's market share held up fairly well, I'm confident my superiors will have a favorably view on the division's performance". As a management accountant, you know a more thorough analysis of the division's performance in the most recent financial year is needed. To facilitate this, you have obtained the following detailed budget and actual data for the division: Budget Actual Units produced and sold Product P 78,000 55,200 Producto 42,000 36,800 Selling price per unit Product P $15 $15.20 Producto $12 $12.10 Raw material kilograms, per unit of Product P 2.0 2.1 Product Q 1.2 1.4 Direct labor hours, per unit of Product P 0.5 0.55 Producto 0.2 0.2 Raw material price per kilogram $4 $4.10 Wage rate per direct labor hour $11 $10.80 Fixed overheads $57,000 $44,000 The South Division produces and sells two products ('P' and 'Q') which both require the same grade of labor and raw materials. The division manager declares that the division's most recent financial year has been disappointing, and he has provided you with what he considers to be the important financial indicators of the division's performance, as follows: Budget Actual ($) ($) Sales 1,874,000 1,584,320 Net profit 277,000 143,440 The division manager has said he is "determined to look on the bright side... sales exceeded the 1.5m barrier even though the total market shrank in size, nevertheless our division's market share held up fairly well, I'm confident my superiors will have a favorably view on the division's performance". As a management accountant, you know a more thorough analysis of the division's performance in the most recent financial year is needed. To facilitate this, you have obtained the following detailed budget and actual data for the division: Budget Actual Units produced and sold Product P 78,000 55,200 Producto 42,000 36,800 Selling price per unit Product P $15 $15.20 Producto $12 $12.10 Raw material kilograms, per unit of Product P 2.0 2.1 Product Q 1.2 1.4 Direct labor hours, per unit of Product P 0.5 0.55 Producto 0.2 0.2 Raw material price per kilogram $4 $4.10 Wage rate per direct labor hour $11 $10.80 Fixed overheads $57,000 $44,000