The Burlington plant of Consumer Cosmetics is responsible for manufacturing all the lip gloss products that the company manufactures. In 2015 the plant had the following budgeted and actual costs.

		2015				2015
		Budget				Actual
Raw materials		$ 100,000		10.0%		$ 110,000		10.2%
Direct labour		250,000		25.0%		275,000		25.6%
Manufacturing overhead		400,000		40.0%		440,000		41.0%
Distribution costs		100,000		10.0%		110,000		10.2%
Administration		150,000		15.0%		140,000		13.0%
Total		$1,000,000		100.0%		$1,075,000		100.0%
Production units		850 kg				935 kg

Required

(a) Head Office is complaining about cost over-runs. It says that all the manufacturing costs are higher than the budget in both $ and %. As manager of the plant, how would you respond to justify your position?

(b) Ignoring price changes, etc., if you were told that the quantity to be manufactured in 2016 would be 1,000 kg, prepare the budget for 2016.