Sam Chase is the Finance Director of Flowers.co.uk, an Internet company that enables customers to order home deliveries of flowers by accessing its website. Flowers.co.uk has a network of florists ('strategic partners') who do the physical delivery of flowers. Flowers.co.uk has a group of representatives that continually visit florists and nurseries. This group monitors product and service quality and explores new products or new partners.

Chase is concerned with the efficiency and effectiveness of the finance function at Flowers.co.uk. He collects the following information for three finance activities in 2007

The budgeted amounts are based on an analysis of costs in past periods at Flowers.co.uk. The output measure is the number of deliveries, which is assumed to be the same as the number of remittances. Debtors is an output-unit-level-driven cost, whereas creditors and travel and expense are batch-driven costs.
Required
1. Prepare a flexible-budget based report explaining difference between budgeted and actual costs for each of the three finance activities in 2007. Comment on the results.
2. Why might the variances computed in requirement 1 pertain to efficiency but not effectiveness?
3. How might Chase monitor the effectiveness of the three finance processes in this exercise?

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Actual total volume of activity Budgeted Budgeted Activity measure total cost of activity total volume of activity Actual cost of pro Finance activity cesS Creditors Debtors Number of invoices Number of remittances Number of expense reports £580000 639000 200000 £594 020 1000000 711000 13986 212150 948 000 Travel and expenses 15 200 2000 1 890