Q. 1 Lewisham Ltd makes and sells one standard product, the standard costs of which are as follows:

Direct materials: 3 kg at 2.50 per kg 7.50

Direct labour: 15 minutes at 9.00 per hour 2.25

Fixed overheads 3.60

13.35

Selling price 20.00

Standard profit margin 6.65

The monthly production and sales are planned to be 1,200 units. The actual results for May were as follows:

Sales 18,000

Less: Direct materials (7400) (2800 kg used)

Direct labour (2,300) (255 hours used)

Fixed overheads (4100)

Operational profit 4,200

There were no stocks of any description at either the start or end of the month. As a result of poor sales demand during May, the business had reduced the price of all sales by 10%.

Required:

Draw up the original and flexed budgets alongside the actual results for May