Jubilee Limited makes product Z$.$ The manager at Jubilee Limited is reviewing the results of

the company for the previous $12$ months. In the year ending $31$st March $2023,$ Jubilee Limited

expected to produce $50,000$ units of product Z$.$

The following additional information is provided:

$($i$)$ The expected selling price of product Z is $100$ per unit.

$($ii$)$ Assume there is no opening or closing inventory at Jubilee Limited.

$($iii$)$ The original budget for the year ending $31$st March $2023$ shows the following:

$$

Sales revenue $5,000,000$

Raw materials $(250,000$ kg$)(2,500,000)$

Labour $(25,000$ hours$)(500,000)$

Fixed overheads $(120,000)$

Profit $1,880,000$

$($iv$)$ The actual results for Jubilee Limited for the year ending $31$st March $2023$ were as

follows:

Output $($production and sales$)49,000$ units

$$

Sales revenue $4,655,000\mathrm{.}00$

Raw materials $(281,750$ kg$)(2,606,187\mathrm{.}50)$

Labour $(22,050$ hours$)(463,050\mathrm{.}00)$

Fixed overheads $(115,000\mathrm{.}00)$

Profit $1,470,762\mathrm{.}50$

REQUIRED:

a$.$Variance analysis is of limited use in the modern business environment.$$ With

reference to this statement, provide an evaluation of standard costing and variance

analysis in modern businesses which require feedback on financial and non$-$financial

performance. Provide illustrative examples to support your answer wherever possible.

$[15$ marks$]$

b$.$ Explain why it is necessary to calculate a flexed budget. Using the above data for the

year ended $31$st March $2023,$ calculate the flexed budget for Jubilee Limited. Show

your workings.

$[7$ marks$]$

End of Paper

$7$

c$.$ i$.$ Calculate a set of variances for Jubilee Limited to reconcile budgeted and actual

profit for the year ended $31$st March $2023.$ Ensure that you show both the price and

quantity variances for sales, raw materials and labour in your answer. Show your

workings.

$[11$ marks$]$

ii$.$ Perform a reconciliation between the budgeted and actual profit for the year ended

$31$st March $2023.$

$[4$ marks$]$

d$.$ i$.$ Why is the $$controllability principle$$ important? Explain your answer.

$[4$ marks$]$

ii$.$ For any three of the variances calculated in part $($c$)$:

$$ provide some suggestions as to the possible cause of the variance, and

$$ indicate which manager at Jubilee Limited should be held accountable for the

variance $($if any$)$ and why.

$[9$ marks$]$