As sales manager, Joe Batista was given the following static budget report for s

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.

SORIA COMPANY
Clothing Department
Budget Report
For the Month Ended October 31, 2017

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

8,400

9,000

600

$2,352

$2,160

$192

1,008

720

288

3,696

3,600

96

1,512

1,080

432

8,568

7,560

1,008

1,100

1,100

–0–

1,200

1,200

–0–

700

700

–0–

400

400

–0–

3,400

3,400

–0–

$11,968

$10,960

$1,008

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. Do not leave any answer field blank. Enter 0 for amounts.)

SORIA COMPANY
Clothing Department
Budget Report
For the Month Ended October 31, 2017

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

Sales in units

8,400

9,000

600

Favorable Variable expenses     Sales commissions

$2,352

$2,160

$192

Favorable     Advertising expense

1,008

720

288

Favorable     Travel expense

3,696

3,600

96

Favorable     Free samples given out

1,512

1,080

432

Favorable        Total variable

8,568

7,560

1,008

Favorable Fixed expenses      Rent

1,100

1,100

–0–

Neither Favorable nor Unfavorable      Sales salaries

1,200

1,200

–0–

Neither Favorable nor Unfavorable      Office salaries

700

700

–0–

Neither Favorable nor Unfavorable      Depreciation—autos (sales staff)

400

400

–0–

Neither Favorable nor Unfavorable        Total fixed

3,400

3,400

–0–

Neither Favorable nor Unfavorable Total expenses

$11,968

$10,960

$1,008

Favorable SORIA COMPANY Selling Expense Flexible Budget Report Clothing Department For the Month Ended October 31, 2017 Difference Favorable Unfavorable Neither Favorable nor Unfavorable Budget Actual

Explanation / Answer

difference Budget actual Sales in units per unit 9,000 9,000 Variable expenses sales commission 2352/8400 0.28 2520 2,160 360 F advertising expense 1,008/8400 0.12 1080 720 360 F travel expense 3,696/8400 0.44 3960 3,600 360 F free samples given 1,512/8400 0.18 1620 1,080 540 F total variable 1.02 9180 7,560 1,620 F Fixed expenses Rent 1,100 1,100 0 N sales salaries 1,200 1,200 0 N office salaries 700 700 0 N Depreciation 400 400 0 N total fixed 3,400 3,400 0 N total expenses 12,580 10,960 1,620 F

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