Welco Ltd manufactures one type of hydraulic jack. The labour force, who are all paid at the same rate, assemble and finish two bought-in components. Each jack uses two metal castings and one rubber seal. The jacks are very popular and Welco sells all it can make. It budgets to make a profit of £4,400 each month. The budget is as follows:

The £7 fixed overhead consists of production, marketing and administration overheads. It is based on production and sales of 1,100 jacks (the budgeted activity level for each month). Last month, the actual results were as follows:Number of jacks made and sold...................................................  1,050................................................................................................................... £Rubber seals (1,060 @ £1.95).......................................................... 2,067Metal castings (2,108 @ £3.25)........................................................ 6,851Direct labour (190 hours @ £5.90).................................................. 1,121Fixed overhead incurred.................................................................. 7,600............................................................................................................ 17,639Sales revenue (1,050 @ £19)........................................................... 19950Actual profit......................................................................................... 2,311

Tasks:1.  Flex the budget to the actual level of activity.2.  Analyse the variances in as much detail as the figures will allow.3.  Create a profit reconciliation statement.