Question
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
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.
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