Reference no: EM133129837

Question - Adoro is a medium size company that operates in Sudbury, Ontario. The company's products include gourmet olive oils, balsamic vinegars, salts and peppers and many more. Adoro products can be purchased online or found in local retail stores in Sudbury, North Bay, Sault Ste. Marie, Timmins, and others. One of the key strategies for the company's success is the use of the flexible budgeting system. The Olive Oil division anticipates the following variable costs: direct materials $5.25 per bottle, direct labour $3.80 per bottle and manufacturing overhead $1.45 per bottle. In addition, the fixed costs include manufacturing plant rent $13,800 and administrative $7,900. These variable and fixed costs are based on the estimation of production relevant range between 3,000 and 5,000 bottles of olive oil.

Required -

a) Prepare the Olive Oil division's flexible budget for the relevant range of activity levels, by using increments of one thousand bottles of olive oil.

b) Explain what budgetary control is.