Vesterbro Ltd manufactures a small number of components for the wind turbine industry, including its Siva safety harness. For the financial year January to December 2018 the company has determined that its budgeted selling price will be 150 euro per harness.

The cost of materials for each harness has been estimated at 5 euro per kilogram, each harness requiring 6 kilograms. Two hours of labour are required to produce each harness, at a cost of 12 euro per hour. The variable overheads per hour are projected to be 14 euro. These costs are applicable throughout the year. Monthly output and sales is proposed to be 10,000 units. The annual budgeted fixed overheads for 2018 have been estimated at 1,740,000 euro, applied to each month, equally.

At the end of March the following information was identified:

Number of units manufactured and sold was 9,500

Sales revenue for March 2018 1,396,500 euro

Cost of materials 293,607 euros for 57,570 kilograms purchased

Labour costs 237,006 euro at an average cost of 12.60 euro per hour

Variable overheads incurred 281,960 euro

Fixed overhead costs incurred 139,200 euro.

Required:

(i) Construct a budgeted profit statement for the month of March 2018 together with a flexed budget statement for the Siva harness.

(ii) Calculate the relevant variances required to reconcile the budgeted and actual costs incurred in producing Siva safety harnesses in March 2018.

(iii) Briefly comment on your analysis.