Althea Ltd. makes a standard product, which is budgeted to sell at $4.00 a unit,...
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Althea Ltd. makes a standard product, which is budgeted to sell at $4.00 a unit, in a competetive market. It is made by taking a budgeted 0.4 kg of material, budgeted to cost $2.40/kg and having it worked on by hand by an employee, paid a budgeted $8.00/hour, for a budgeted 6 minutes. Monthly fixed overheads are budgeted at $4,800. The output for May was budgeted at 4,000 units. The actual results for May were as follows: Sales revenue (3,500 units) Materials (1,425 kg) Labor (345 hours) Fixed overheads Actual operating profit 13,820 (3,420) (2,690) (4,900) 2,810 No inventories of any description existed at the beginning or end of the month. Points 13 35 Required: a. Prepare the flexible budget and compare it to the actual results. b. Calculate all the variances in as much detail as the information provided allows. c. Reconcile the budget variances. d. Who is the responsible manager (position) for each of the variances above? e. Discuss each variance, stating what you think could be the cause of the variance. 6 7 14 Solve here
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