Firstline Ltd. Is concerned about the uncertain nature of its market for the upcoming year and has prepared budget results based on 90%, 100% and 105% activity as follows:

	90%	100%	105%
Output	45,000	50,000	52,500
Revenue	$1,350,000	$1,500,000	$1,575,000
Less: Material costs Labour costs Production overhead costs Administrative costs Selling and distribution costs	337,500 440,000 217,500 120,000 70,000	375,000 485,000 235,000 130,00 75,000	393,750 507,500 243,750 135,000 77,500
Net profit	$165,000	$200,000	$217,500

Only 37,500 units have been sold with the following results:

	$	$
Revenue		$1,075,000
Less: expenses
Material costs	311,750
Labour costs	351,500
Production Overhead costs	171,250
Administration costs	117,500
Selling and distribution costs	66,500	1,018,500
Net Profit		56,500

1. The budget selling price is $30 per unit.
2. All production is sold.
3. The fixed element of the budgeted costs will remain unchanged at all levels of production.

Required:

1. Prepare a statement for the year showing the flexible budget at the actual level of activity. (12 marks)
2. Examine the variances of $20,000 or greater, analysing the possible reasons for such variance. (9 marks)
3. What are the differences between a fixed budget and a flexible budget. ( 4 marks).