2 (20 marks) A candle maker in the local town estimates that the next year's production...

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2 (20 marks) A candle maker in the local town estimates that the next year's production of candles should be 11,000 to meet anticipated demand for holiday candles. The cost information for preparing her budget for the business was as follows: Revenue per candle Direct materials per candle Direct labour per candle $20.00 2.20 6.00 Variable overhead cost per candle 1.50 Fixed manufacturing costs (annual) $26,000 Fixed administrative costs (annual) $39,000 The business did not produce and sell 11,000 candles as anticipated but instead sold 9,900 candles for the year. Actual performance for the year is: Revenue Direct materials Direct labour Variable overhead cost Fixed manufacturing costs Fixed administrative costs Operating income $197,300 21,200 60,000 13,500 24,500 38,200 $ 39,900 a) In assessing her performance, the business owner's comparison of actual to budget for the year was disappointing. Why might that have occurred? (5 marks) b) Prepare a flexible budget for a sales level of 9,900 candles. (10 marks) c) Calculate the variances between actual and flexible budgets at sales of 9,900 candles. (5 marks) 2 (20 marks) A candle maker in the local town estimates that the next year's production of candles should be 11,000 to meet anticipated demand for holiday candles. The cost information for preparing her budget for the business was as follows: Revenue per candle Direct materials per candle Direct labour per candle $20.00 2.20 6.00 Variable overhead cost per candle 1.50 Fixed manufacturing costs (annual) $26,000 Fixed administrative costs (annual) $39,000 The business did not produce and sell 11,000 candles as anticipated but instead sold 9,900 candles for the year. Actual performance for the year is: Revenue Direct materials Direct labour Variable overhead cost Fixed manufacturing costs Fixed administrative costs Operating income $197,300 21,200 60,000 13,500 24,500 38,200 $ 39,900 a) In assessing her performance, the business owner's comparison of actual to budget for the year was disappointing. Why might that have occurred? (5 marks) b) Prepare a flexible budget for a sales level of 9,900 candles. (10 marks) c) Calculate the variances between actual and flexible budgets at sales of 9,900 candles. (5 marks)