QUESTION 4 Sweetsupplies Plc is a large manufacturer of confectionary. It accounts for its manufacturing plants by department. Below are the budgeted and actual figures relating to one of those departments for October: Direct materials Direct labout Production overhead Selling overhead Administration overhead Budget 20,000 32,000 42,000 33,000 50,000 Actual 23,000 35,000 42,000 34,000 51,000 The budget shown above was for planned production and sales of 4,000 units but due to customer demand, the actual production and sales quantity in the month was 4,500 units. The table below, shows the actual results of the two months prior to the one shown above. Units made and sold Direct materials Direct labour Production overhead Selling overhead Administration overhead August Actual September Actual 3,440 5,000 17,188 25,000 27,500 40,000 40,313 45,000 31,875 35,000 50,000 50,000 Required a) Produce a flexed budget for October and calculate the variances between the flexed budget and actual results for the month. Distinguish between fixed and variable overheads. (20 marks) Explain why failing to calculate flexed budgets may prove demotivating for operational managers. (5 marks) Total 25 marks