Question 2 Heidi is the manager of Division C of Manoto Ltd. She was appointed to the role about 3 years ago and is well established in the company as an excellent salesperson, although she readily accepts that finances are not her strongest point. One day she arrives in work to find the following email:

To: Heidi Warwick From: Kevin Moore - Manoto Ltd., Finance Division Date: 4 January 2021 Subject: Performance Report Dear Heidi, The company has decided to adopt a system of responsibility accounting, so we will be sending you a Flexed Budgeted Profit Statement every 3 months, which we will compare to your actual results. We have also decided to link your performance against the budget to our appraisal system. Responsibility accounting means that you are responsible for ensuring that the performance of your division is kept in line with the budget and the actual performance will be compared with it. Any differences will be highlighted by us, so that you can identify important variations from the budget and take any necessary corrective action. Any variation in excess of the budget must be investigated and an explanatory email sent back to me, giving reasons and any proposed corrective action. We will be using the information below to calculate your Flexed Budgeted Profit Statement for the 3 months to 31 December 2020. Currently it is operating at a normal level of activity of 50% which represents an output of 6250 units. Kevin Moore believes that a realistic forecast for the next budget period would be a level of activity of 35%

Information: 50% 60% 70%

Direct materials 62,500 75,000 87,500

Direct wages 43,750 52,500 61,250

Production overhead 51,250 57,500 63,750

Administration overhead 35,000 35,000 35,000

Selling overhead 47,500 55,000 62,500

------------- ----------- -----------

Total cost 240,000 275,000 310,000

======= ======= =======

Profit is 25% of selling price. You have recently been appointed as the Management Accountant for Manoto Ltd., which is a new role within the company and it has become clear to you over the last few weeks that the morale of the managers of the division is low. Heidi's morale is not high.

b) Use the information above to produce a Flexed Budgeted Profit Statement for Division C for the 3 months to 31 December 2020, which shows the expected Contribution .