Trinity Records is a company that finds and signs a new artist, develops a marketing strategy, records the music, and distributes the music to retailers. Data for the CD division of Trinity Records, which distributes CDs to large retailers, are shown in the following table.

The budget, set at the beginning of the year, was based upon estimates of sales and costs. Administrative expenses include charges by corporate headquarters for providing strategic guidance. These fixed costs are allocated to divisions using revenue as the allocation base.

Required

Due to a booming economy, the division’s unit sales were higher than anticipated, even though the division’s share of the CD market fell from 22 per cent to 20 per cent during the year. How will this impact on the future budgeting of the CD division and other divisions of Trinity Records?

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Budget ('000) Actual ('000) $16 491 5 892 Revenue $17480 Variable production costs Fixed manufacturing costs Variable selling expenses Fixed selling expenses Administrative expenses Operating income 6451 1977 2 032 456 550 1275 1 268 4773 5550 $ 2118 $ 1629