In-class practice Exercise Flex Budgets Chloe sells just one type of lipsticks. For a number of years the sales were decreasing but due to new Kardashian TV programme the demand has again picked up. Chloe is however worried about the large adverse variances. The company has prepared the following report for the year ending 31 July 2021. Details Production/Sales (units) Sales revenue () Direct material () Direct labour () Production overheads () Selling and distribution costs () Administration costs () Total costs () A Profit () Budget 10,500 126,000 52,500 31,500 26,000 10,200 4,200 124,400 1,600 Required: Actual 14,000 166,600 58,000 34,200 30,000 10,500 4,800 137,500 29,100 (a) Compute flexed budget with actual quantity. Variance 3,500 F 40,600 F 5,500 A 2,700 A 4,000 A 300 A 600 A 13,100 27,500 The following point have been revealed concerning the budget: Production overheads are 37,000 at the maximum annual capacity of 16,000 units. The production overhead comprises of a fixed and a variable element. F (14 marks)