As sales manager, Joe Batista was given the following static budget report for s
ID: 2477089 • Letter: A
Question
As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Soria Company for the month of October. As a result of this budget report, Joe was called into the president's office and congratulated on his fine sales performance. He was reprimanded, however, for allowing his costs to get out of control. Joe knew something was wrong with the performance report that he had been given. However, he was not sure what to do, and comes to you for advice. Prepare a budget report based on flexible budget data to help Joe. (List variable costs before fixed costs.)Explanation / Answer
Solution:
Flexible budget is the budget prepared on the basis of actual output at standard cost.
Variable Standard Cost per Unit is calculated by taking Budgeted Cost / Budgeted Untis i.e. Variable Cost / 8,100 Units..
Selling Expense Flexible Budget Report
Clothing Department
For the month ended October 31, 2014
Standard Cost $/Unit
Budget
Actual
Difference Favorable (F), Unfavorable (U) , Neither Favorable nor Unfavorable (N)
Sales in Units
10,500
10,500
0
N
Variable Expenses:
Sales Commissions
$0.26
$2,730
$2,625
$105
F
Advertisement expense
$0.11
$1,155
$735
$420
F
Travel expense
$0.45
$4,725
$4,515
$210
F
Free samples given out
$0.17
$1,785
$1,365
$420
F
Total Variable
$10,395
$9,240
$1,155
F
Fixed Expenses:
Rent
$1,300
$1,300
$0
N
Sales Salaries
$1,100
$1,100
$0
N
Office Salaries
$700
$700
$0
N
Depreciation - autos (Sales staff)
$500
$500
$0
N
Total Fixed
$3,600
$3,600
$0
N
Total Expenses
$13,995
$12,840
$1,155
F
Selling Expense Flexible Budget Report
Clothing Department
For the month ended October 31, 2014
Standard Cost $/Unit
Budget
Actual
Difference Favorable (F), Unfavorable (U) , Neither Favorable nor Unfavorable (N)
Sales in Units
10,500
10,500
0
N
Variable Expenses:
Sales Commissions
$0.26
$2,730
$2,625
$105
F
Advertisement expense
$0.11
$1,155
$735
$420
F
Travel expense
$0.45
$4,725
$4,515
$210
F
Free samples given out
$0.17
$1,785
$1,365
$420
F
Total Variable
$10,395
$9,240
$1,155
F
Fixed Expenses:
Rent
$1,300
$1,300
$0
N
Sales Salaries
$1,100
$1,100
$0
N
Office Salaries
$700
$700
$0
N
Depreciation - autos (Sales staff)
$500
$500
$0
N
Total Fixed
$3,600
$3,600
$0
N
Total Expenses
$13,995
$12,840
$1,155
F
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