Kayan Bhd (KB) manufactures a range of bicycle and sells to the retailers. KB has a budgetary control system to monitor revenue and costs in the effort to exercise control.

Due to the spike of pandemic covid-19, the company is budgeted to operate at only 65% of normal capacity, producing 65,000 units in the current year. The directors of KB expect that the company will be able to operate at 85% of its normal capacity. Therefore, actual total sales volume was 85,000 units during the year. The standard costs per unit of the product are:

The variable manufacturing overhead included in semi-variable overheads is RM37.10 per unit. The selling price of the product is RM250. The fixed production overheads are allocated to the product on machine hour basis. A total of 19,500 standard machine hours were budgeted for 65,000 units. A total of 25,700 machine hours were actually used during the year.

The following actual results for 85% capacity were obtained at the year:

In order to ascertain the efficiency and effectiveness of cost performance, KB uses a standard costing system. It compares the actual results with standards to find out discrepancies. Hence, the company will take corrective actions. The management is considering to develop the flexible budget.

Required:

b) Prepare the flexible budget at the new level of activity.

c) Prepare a, report showing the company's revenue and spending variances for the year

d) Discuss TWO (2) ways to prevent the behavioral problems from using standard costs

Direct material Direct labor Semi-variable manufacturing overheads Fixed manufacturing overheads RM 49.00 56.00 48.30 35.00 The following actual results for 85% capacity were obtained at the year: RM RM Sales 22,100,000 Less: Cost of Sales Direct material 4,318,000 Direct labour 4,675,000 Variable manufacturing overhead 3,187,500 Fixed manufacturing overhead 3,811,300 (15,991,800) Profit 6.108.200