Part A information You have observed that the Board of Directors allocates budgets on an annual basis using an incremental approach, adjusting for known inflationary pressures and then applying a 1% cost efficiency reduction. The factory is divided into production lines for each range of cars, with each production line having an allocated operational manager who has responsibility for managing the budget. The Budgets reports are produced by the Management Accounts department after the end of each month and presented and discussed 3 weeks later in monthly performance meetings involving the Budget Manager, the Director of Operations and the Director of Finance. Reports are not distributed before the meeting. An example monthly budget report is shown below; BUDGET REPORT Arnold Hatchback 2.2 Production line December 2020 Budget Actual Variance A/F Units of output (cars) 610 670 EOOOs EOOOs EOOOs Revenue 9,760 10,590 830 | F Supplies -3,660 -3,750 90 A Direct Wages -1,220 1,390 -170 |A Direct Utilities -488 570 .82 A Total variable costs -5,368 -5,710 342 A Line Management wages 16 -17 -1 A Production line depreciation .856 845 11 F Selling and Distribution -1,650 -2, 100 -450 | A Apportioned Headquarters Overhead 2, 100 .2,352 252 A Total Indirect Costs 4,622 -5,314 692| A Total Profit -230 -434 204 A Profit % .2% 4% -2% | A In January's budget meeting the budget manager complained that he doesn't understand how the December report can show an adverse position, as he feels he is running the department efficiently, as he has a good handle on securing cheap supplies and has rationalized the production line machinery in the last few months. He feels his performance is judged on costs that he cannot control, in particular selling and distribution costs and headquarters overheads