Pre-seminar Activity Adapted from Drury 10^th Edition

Preparation of Flexed Budgets

You have been provided with the following operating statement, which represents an attempt to compare the actual performance for the quarter which has just ended with the budget:

	Budget	Actual	Variance
Units sold (000s)	640	720	80F
	000s	000s	000s
Sales	1,024	1,071	47
Cost of Sales:
Materials	168	144
Labour	240	288
Overheads	32	36
	440	468	(28)
Fixed labour costs	100	94	6
Selling & Distribution:
Fixed	72	83	(11)
Variable	144	153	(9)
Administration costs:
Fixed	184	176	8
Variable	48	54	(6)
	548	560	(12)
Net Profit	36	43	7

Required

Using a flexible budget approach, re-draft the statement above so as to provide a more realistic indication of the variances and comment briefly on possible reasons why they have occurred (ignore inflation).