QUESTION 2

(a) Gemilang Sdn Bhd, which is aware of the uncertain nature of their market for the coming year, has prepared budgeted profit forecasts based on 90% and 100% activity as follows:

	90% (RM)	100% (RM)
Revenue	2,250,000	2,500,000
Less:
Material costs	337,500	375,000
Labour costs	270,000	300,000
Production overhead costs	217,500	235,000
Administration costs	117,000	130,000
Selling and distribution costs	67,500	75,000
	(1,009,500)	(1,115,000)
Net profit	1,240,500	1,385,000

In fact, actual activity has turned out far worse than expected and only 35,500 units have been sold, with the following results:

	RM	RM
Revenue		1,952,000
Less:
Material costs	311,750
Labour costs	351,500
Production overhead costs	183,500
Administration costs	83,500
Selling and distribution costs	58,570
		(988,820)
Net profit		963,180

Additional information:

(i) The budgeted selling price is RM 50.00 per unit.

(ii) The fixed element of the budgeted costs will remain unchanged at all levels of production.

Required:

Prepare a performance report showing the flexible budget at the actual level of activity, the actual results and the variance for each item of revenue and cost.