Question 07 The Western Division produces and sells two quite similar products ('A' and 'B') which both require the same grade of labour and raw materials. The division manager acknowledges that the division's most recent financial year has been disappointing, and, she has provided you with what she considers to be the key financial indicators of the division's performance, as follows: Budget Actual Sales TAS 1,674,000 TAS 1,284,320 Net profit TAS 143,440 TAS 277,000 10% Market share 9.2% The division manager has said she is "determined to look on the bright side... sales exceeded the TAS 1.25m barrier... even though the total market sbrank in size, nevertheless our division's market share beld up fairly well... I'm confident that I can get my superiors to look favourably on the division's performance". In your judgement, a more thorough analysis of the division's performance in the most recent financial year is needed. To facilitate this, you have obtained the following detailed budget and actual data for the division Actual Budget 78,000 Units produced and sold (Product A) 55,200 TAS 15.20 Selling price per unit (Product A) TAS 15 Units produced and sold (Product B) 42000 36800 Selling price per unit (Product B) TAS 12 TAS 12.1 2 2.1 1.2 1.4 Raw material kilograms, per unit of Product A Raw material kilograms, per unit of Product B Direct labour hours, per unit of Product A Direct labour hours, per unit of Product B 0.5 0.55 0.2 0.2 Raw material price per kilogram TAS 4 TAS 4.1 Wage rate per direct labour hour TAS 11 TAS 10.8 Fixed overheads TAS 50,000 TAS 47,000 Required: Present a detailed variance analysis in which you reconcile the budgeted and actual net profit of the division in as much detail as is possible from the information provided. Assume that a marginal (variable) costing system is used