Management accounting Q5

Question 5 (12 marks) Mrs. Lee Ltd. is a small cake shop that provided take-out and free home delivery services. Mrs. Lee has determined that the shop has two major cost drivers - the number of cakes sold, and the number of deliveries made. Information relating the costs appear below: Fixed cost per month Cost per cake Cost per delivery Ingredients $50 Shop staff $40,000 Utilities 8,000 6 Delivery staff $30 Equipment depreciation 5.000 Miscellaneous 20,000 2 2.5 In December, the shop budgeted for 1,300 cakes at an average selling price of $450 per cake and for 500 deliveries. Information relating the shop's operations in December appear below: Actual result Number of cakes sold 1,350 Number of deliveries 700 Revenue $573, 750 Ingredients 73,000 Shop staff 42,000 Utilities 16,000 Delivery staff 17,000 Equipment depreciation 5,000 Miscellaneous 29,000 Required: (a) Prepare a flexible budget performance report that shows both activity variances and revenue and spending variances for the shop for December. (8 marks) (b) Do you think any of the variances in the report you prepared should be investigated? Why? (4 marks) Total for Question 5: 12 marks)