Norland-Norge AS produces corporate notebooks. Each notebook is designed for an individual customer. The company's operating budget for September 2015 included these data:
Number of notebooks.................................15 000
Selling price per book NKR...............................20
Variable costs per book NKR..............................8
Total fixed costs for the month NKR............145 000
The actual results for September 2015 were:
Number of notebooks produced and sold.........12 000
Average selling price per book.....................NKR 21
Variable costs per book...............................NKR 7
Total fixed costs for the month NKR.............150 000
The managing director of the company observed that the operating profit for September was much less than anticipated, despite a higher-than-budgeted selling price and a lower-thanbudgeted variable cost per unit. You have been asked to provide explanations for the disappointing September results.
Norland-Norge develops its flexible budget on the basis of budgeted revenue per output unit and variable costs per output without a detailed analysis of budgeted inputs.
Required
1. Prepare a Level 1 analysis of the September performance.
2. Prepare a Level 2 analysis of the September performance.
3. Why might Norland-Norge find the Level 2 analysis more informative than the Level 1 analysis? Explain your answer.