HappyLiving Ltd (HP Ltd) is a manufacturer specializing in producing hand-crafted ceramic table lamps for a local market.

The process is labor-intensive. HP Ltd currently uses a standard cost card system. The standard cost card for the first quarter of 2022 is shown below:

Budgeted quantity	8,000
	£
Total revenue from sales	1,200,000
Clay (20,000kg @ £1.80 per kg)	(£36,000)
Labour (48,000 hours @ £19 per hour)	(£912,000)
Fixed overheads	(160,000)
Standard profit	92,000

The actual results relating to the first quarter are disappointing. The profit at the end of the first quarter of 2022 was a £68,530 instead of the budgeted profit of £92,000.

The actual results showed that 8,500 lamps had been sold with revenue for the period being £1,249,500. To produce this quantity of lamps, 22,100kgs of clay were purchased at a cost of £40,885. The labor cost was £977,585 and workers were paid £18.55 per hour. The actual labor hour per unit was 6.2 hours. The fixed overheads incurred were £162,500.

Required:

Prepare a columnar budget statement showing the original budget, the flexed budget, the actual results, and variances for the first quarter of 2022.

Calculate the following variances:

1. Sales price and volume variance

2. Materials price and usage variance

3. Labour rate and efficiency variance

4. Fixed overhead expenditure

Discuss in detail the importance of budgeting as a technique in management accounting.