A company has produced the following performance report for April. The budget shown in the report was based on an original assumption that the total market size for April would be 40 million units. Since the performance report was produced, more accurate market size information has become available. The actual market size for April was lower than estimated at 37.5 million units.
Required:
(a) Produce a statement that reconciles budget profit to actual profit for April in as much detail as possible.
(b) Discuss the advantages and disadvantages of your statement with regard to responsibility accounting.