Rhodophyta Limited is a company selling homeopathic body oils, made using a combination of dehydrated kelp, harvested from the sand flats near the coastal village of Marazion in the UK; and a unique blend of essential oils. For the financial year just ended 31st July 2020, Rhodophyta Limited budgeted to produce 5,000 units, selling them for 130,000. Rhodophyta Limited adopted a standard costing method to prepare the budget. That production was budgeted to use 4,000 kg of materials, costing 16,000. Direct labour was budgeted as being 18,000, based on 1,200 labour hours being worked. Variable production overheads were budgeted to be 10,000 and fixed production overheads as 25,000. Production overheads are charged in on the basis of machine hours, and each product unit uses two machine hours in addition to labour hours.

The actual results for the year ended 31st July 2020 were:

Sales

5,500 units, 132,000

Direct materials

4,500 kg

Direct labour

1,550 hours

Variable production overheads

10,100

Fixed production overheads

26,000

a) Prepare a statement for the directors of Rhodophyta Limited showing Original Budget, Actual Results, Flexed Budget, and Variances. Include a reconciliation of the Budgeted Profit with Actual Profit.