Question

Use the following information to answer questions 42 to 44:

The following summary data are from a performance report for CDE Ltd for June, during which 11,000 units were produced. Budgeted production was 10,000 units.

	Budget (10,000 units)	Actual Costs (11,000 units)	Variances
Raw materials	$200 000	$208 800	$8 800 A
Direct labour	$70 000	$71 000	$1 000 A
Factory fixed overhead	$24 000	$24 200	$200 A
	$294 000	$304 000	$10 000 A

The performance report shows an overspending (adverse / unfavourable variance) of $10,000. Senior management (with no accounting background) is not impressed with the performance reflected in this report. Why might the factory manager under evaluation question the accuracy of the report above?

Revise the performance report using flexible budgeting.

Comment on the performance of the factory manager based on your revised report.

please show working out

Answer 1