Question 3 Mehta Bakers Ltd produce breads, cakes and pastries for sale to supermarkets. Their best- selling product id the Mehta Naan. The company sources flour for the product from two flour millers. Their products are called AllBake and CookSure respectively. Whilst basic quality is important the decision on which supplier to use is primarily based on price. A standard production batch on Naans uses 100 kilos of a flour. Either flour can be used to make the Naans. In the preparation of their budget for 2020, Mehta Ltd forecast an average price for CookSure of 0.40 per kilo, and, as the price for AllBake was higher than this, prepared the budget based on using CookSure. At the end of the period, the budgeted output of 1000 batches was achieved. The actual use of CookSure flour being 95,000 kilos at actual cost of 37,050. However, now looking back over the year, the management of the firm have found that the average market prices that existed for CookSure was 0.90 per kilo, and for AllBake 0.60 per kilo. Flours cannot be mixed or changed in the baking process as changes to the setting of machinery and the baking process are required. Therefore, Mehta does not allow the operating managers to reverse the initial decision to use CookSure on a day-to-day basis if the relative price of the substitute flour changes. Required 1. Calculate materials cost, price and usage variances based on a static standard cost for the materials. 2. Calculate revised variances allowing for planning and operational issues. 3. Using the calculations above, and referring to principles of good control information, explain why variances that include both planning and operational issues provide better control information.