Assignment on Topic 1: Advanced variance analysis: “Leitrim Ltd.”Leitrim Ltd. is an autonomous division of Connacht PLC. Leitrim manufactures andsells two fairly similar products, both of which require the same grades of rawmaterial and direct labour. Under a long-standing arrangement, the annual bonuspaid to senior management of Leitrim Ltd. is calculated as a percentage of thetotal sales revenue achieved by the division in the year.The chief executive officer (CEO) of Connacht PLC argues that this bonusarrangement is too generous and does not hold senior management at LeitrimLtd. sufficiently responsible for that division’s overall profitability. However, seniormanagement at Leitrim Ltd. have denied that the existing bonus arrangement isin any way lenient towards them, in the following terms: “If sales decline, we arepenalised for that in our bonus, despite the fact that the Irish economy is clearlyan extremely challenging economic environment for anyone to do business in atpresent. There is also a clear trend in consumer tastes with customers switchingfrom the higher-priced ‘Product A’ to the lower-priced ‘Product B’, and thisadversely affects the sales figures and our bonus”./ ... question continues on the next page ... Page 2 of 2/ ... question continued from the previous page ...You are provided with the following budget and actual data for Leitrim Ltd. for themost recent financial year:Budget /Actual figuresSales units (Product A) 84,000 62,000Selling price per unit (Product A) €30 €30Sales units (Product B) 36,000 38,000Selling price per unit (Product B) €20 €18Raw material kilograms, per unit of Product A 4 3.9Raw material kilograms, per unit of Product B 1.5 1.45Direct labour hours, per unit of Product A 0.9 0.85Direct labour hours, per unit of Product B 0.4 0.45Raw material price per kilogram €3.30 €3.30Wage rate per direct labour hour €10 €10.50Fixed overheads €520,000 €535,000Net profit €533,000 €296,330There is only type of raw material and one grade of direct labour used inproduction. Because Products A and B are (for all practical purposes) substitutesfor each other, they are regarded as competing in the same market. When thebudget for the Leitrim operation was being prepared, it was estimated thatProducts A and B would have a combined market share of 25%. It is believed thatthe actual sales units achieved represented a combined market share of 20%.Required:(a) Using variance analysis, reconcile the budgeted and actual net profit in asmuch detail as is possible from the information provided. Your answer shouldinclude sales mix, sales quantity, market share, and market size variances.