Question 3 ABC Ltd manufactures parts that are used as components by car manufacturers. All of their materials are imported. Their management information from last year is shown below Original budget Actual Volume Sales revenue Variable Costs: Material Labour Distribution 450,000 550,000 36,000,000 43,450,000 6,300,000 7,150,000 2,250,000 3,300,000 1,350,000 1,705,000 Total variable costs 9,900,000 12,155,000 26,100,000 31,295,000 Contribution Fixed costs Quality control Rent and rates 200,000 240,000 4,000,000 4,200,000 3,200,000 7,200,000 7,640,000 Administration Total fixed costs 3,000,000 Operating Profit 18,900,000 23,655,000 Required: a) Prepare a report that shows the variances, discusses possible reasons for the variances, and in the case of adverse, how they might be avoided in future. [20 Marks] b) Briefly explain why, even though the budget shows a 19m profit, the company should prepare a monthly cash budget. [5 marks]