Kleanpacks Ltd. make liquid cleaner. The following is a copy of the original budgets and actual performance of the company for the last 12 months.

	Draft	Budgets			Actual
Sales (litres)	2,000,000		3,000,000		2,600,000
	£000	£000	£000	£000	£000	£000
Turnover		10,000		15,000		14,300
Materials	1,600		2,400		1,950
Labour	1,800		2,700		2,392
Power	1,300		1,950		1,768
Storage	870		1,030		992
Transport	1,040		1,560		1,410
Maintenance	770		770		790
Depreciation	970		970		960
Admin	650		650		658
		(9,000)		(12,030)		(10,920)
Profit		1,000		2,970		3,380

Additional Information:

• Materials, Labour and power are variable costs

• Storage is a semi-variable cost

• Transport is a stepped fixed cost. For every £130,000 spent on transport, the company can carry 250,000 litres

• Maintenance, depreciation and admin are fixed costs

Tasks:

1. Prepare a flexed budget for the actual sales volume and compare it with the actual results showing total variances (21 marks)

2. Suggest two possible reasons for each of the Material and Labour variances

(4 marks)

Answer rating: 100% (QA)

Answer 1 Flexible Budget with comparison with Actual data and computation of Variance and its Effect Particulars Flexible Budget 000 Actual 000 Variance Effect Sales Liters 2600 2600 Sales Revenue 130... View the full answer