Required(i) Prepare a summary statement (in the same format as shown above) which clearly shows the effect of all the changes proposed by the directors of the company. (ii) Discuss the motivational factors in involving operation managers in the setting of operating budgets

Iolts 8: Co. has prepared the following summary from its operating budgets for the year ended 30\"1 eptember 2014. $000 $000 Sales (100,000 units) 1,500 Opening inventory (zero units) Nil Production costs (115,000 units): Direct materials 460 Direct labour 575 Variable overhead 115 Fixed overhead 230 1,380 Closing inventory [15,000 units) Cost of Sales 1,2__0_0_ Gross Profit 300 Other overhead costs @ Net Profit m be directors of Colts 8: Co. have now met to review the above statement and have decided to evise the budget as follows: ' Due to competition, reduce selling price by $5 per unit and despite the reduction in selling price the demand for the product will reduce to 90,000 units. ' Increase some of the unit production costs: direct labour by 10% and variable overhead bI 5%. No change is expected to any other costs. Reduce production to 100,000 units