Randolph's Budgeted Income Statement for the Year Ending 31/03 Is

Essay

Randolph's Budgeted Income Statement for the year ending 31/03 is as follows:
a Calculate the variances for 20X5 and state as F (favourable)or U (unfavourable).
b Which variances would you investigate first and why?
c Prepare the 20X6 budget assuming it is based on the 20X5 budget adjusted as follows:
• Sales price will increase by 16%,sales units by 10%
• Cost of goods sold,Delivery and Packaging will be the same % of sales as in 20X5
• Sales bonuses will be 3% of sales in 20X6
• Advertising will increase by 15% on the 20X5 budget figure
• all other expenses to be same as the 20X5 budget figures.
d Calculate the variances for 20X6 and state as F or U.
e Explain possible reasons for variances and comment on the sales price decision for 20X6.
f Assume Cost of goods,Delivery,Packaging and Sales bonuses are the only variable expenses (i.e.the other expenses are all fixed).
Calculate the breakeven point in units for both years using the budget figures.