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Question 2 Read through the information below and answer the questions that follow. WPlc is a manufacturer of electrical components which has contracts to supply several major engineering contractors. The company's objectives include the aim of operating protably overall, although the directors accept that results of individual products will vary according to the competitiveness of markets. Targets are therefore set for each individual product and market. Woperates twelve monthly budget periods for management control purposes. Setoutbelow is a part ofthe master budget for Product NRIE for Period 1D. This budget is based on normal annual operating capacity of, units evenly distributed over the year. Product NRIE was introduced eighteen months ago and the sales director is exploring new markets for its sale. Budget for Period 10: Product ERIE Per unit Total Selling price .E l Direct materials @ 25 {I per kg 4 leg Machine time 3D minutes Direct labour @ :E 15 . per hour lZ minutes Manufacturing overhead: variable with machine horns 2_ Manufacturing overhead: xed ahsorhedper unit of output 15,000 \fMachines used recorded 29D hours on Product NRIE in Period 1D. I a. . Prepare an overall budget production statementthat shows both the original and the exible budget for Product NRIZ for Period if]. {Your performance report should be in a very similar forrnatto Table 3.6 in UnitZ Session 3. The only difference is to add a new column {a} at the beginning of the table which shows standard selling price, standard cost per unit {for each variable co st}, standard contribution per unit, standard xed cost per unit and standard prot per unit} {23 marks} - b. . Interrns of management control, explain the benet to Win using the standard cost information asked for in {a} above. {3 marks} I C. . The budget production statement in {a} above is based on the marginal costing system. Describe a market situation where it is appropriate for planned costs to be set and monitored on {i} a marginal costing basis and {ii} an absorption costing basis. {'6 marks} - d. . Fjsing absorption costing, what is the xed overhead volume variance for Product NRIE in Period 1U? Why is this variance relevant to absorption co sting but not to marginal co sting? { 5 marks}