Question: Pilot Ltd makes a standard product, which is budgeted to sell at £5.00 a unit. It is made by taking a budgeted 0.5 kg of material, budgeted to cost £3.00 a kilogram, and working on it by hand by an employee, paid a budgeted £5.00 an hour, for a budgeted 15 minutes. Monthly fixed overheads are budgeted at £6,000. The output for March was budgeted at 5,000 units.

The actual result for March were as follws:

                                                                                      £

                       Sales revenue (5400 units)                26,460

                       Materials (2830 kg)                            (8,770)

                       Labour (1300 hours)                          (6,885)

                       Fixed overheads                                 (6,350)

                       Actual operating profit                         4,455

No inventories existed at the start or end of march.

Required:

(a) Deduce the budgeted profit for March and reconcile it with the actual profit in as much detail as the information provided will allow.

(b) State which manager should be held accountable, in the first instance, for each variance calculated.