Question 15 Management Accounting - Planning and Control: Rainbow Company processes potatoes into a variety of different types of cut chips such as 'thin cut' or 'original cut'. The company can sell its output at $200 per ton of potatoes processed. The following budgeted and actual data has been prepared for the year ending 31 December 2019. Budgeted data Actual data Volume processed and sold 5,800 6,500 Sales revenue $1,160,000 $1,235,000 Less: Costs: Variable production 568,400 598,000 Fixed production 220,000 215,000 Variable marketing 127,600 130,000 Fixed marketing and 185,000 220,000 administrative Profit $59,000 $72,000 Management is disappointed that the actual profit showed only a small increase when compared with the budgeted profit. They had expected better results from the large increase in sales and their careful monitoring of production costs. Required: (a) Prepare a flexed budget for the year ended 31 December 2019 based on sales and production of 6,500 tons and calculate the overall budget variance, sales volume variance, and individual flexed variances; indicating whether each variance is favourable (F) or adverse (A). (b) Suggest two possible explanations for the significant variances. max 50 words