Jump Co plc sells jumpers through a website. It has discovered that it will probably only sell 4 500 jumpers compared to 5 000 in the original budget. The original selling price was @ £125 per jumper. The total actual sales revenue will now be £675 000; all the budgeted cost items, both fixed and variable, will actually exceed the original budget by 8% however, despite the lower sales volume.

The budget of original costing is as below:

a) Prepare a comparison table which details the actual performance, original budget, revised flexed budget and variance analysis (U/F) based upon the above information.

b) Comment on results produced in question a) and identify relevant actions that should be taken in response to the variance analysis.

c) Draft a memorandum to the directors of Jump Co that explains and discusses the main behavioural issues that might impact the budget setting process. Identify relevant management controls that could be introduced to reduce any negative impacts these issues might present.

Materials Variable Labour Deliveries - fixed Rent - fixed Fixed Salaries General Administration - fixed Maintenance - fixed Budget 270 000 145 000 80 000 15 000 30 000 12 000 27 000