Exercise 10-9 As sales manager, Joe Batista was given the following static budge

Question

Exercise 10-9

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

8,200

11,000

2,800

$1,804

$2,750

$946

820

990

170

3,772

4,950

1,178

1,968

1,320

648

8,364

10,010

1,646

1,300

1,300

–0–

1,300

1,300

–0–

800

800

–0–

400

400

–0–

3,800

3,800

–0–

$12,164

$13,810

$1,646

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
Selling Expense Flexible Budget Report
Clothing Department
For the Month Ended October 31, 2017

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

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

8,200

11,000

2,800

Favorable Variable expenses     Sales commissions

$1,804

$2,750

$946

Unfavorable     Advertising expense

820

990

170

Unfavorable     Travel expense

3,772

4,950

1,178

Unfavorable     Free samples given out

1,968

1,320

648

Favorable        Total variable

8,364

10,010

1,646

Unfavorable Fixed expenses      Rent

1,300

1,300

–0–

Neither Favorable nor Unfavorable      Sales salaries

1,300

1,300

–0–

Neither Favorable nor Unfavorable      Office salaries

800

800

–0–

Neither Favorable nor Unfavorable      Depreciation—autos (sales staff)

400

400

–0–

Neither Favorable nor Unfavorable        Total fixed

3,800

3,800

–0–

Neither Favorable nor Unfavorable Total expenses

$12,164

$13,810

$1,646

Unfavorable

Explanation / Answer

flexible Actual Difference budget budget Sales in units 11,000 11,000 variable expenses Sales commissions 2420 2,750 330 U Advertising expense 1100 990 110 F travel expense 5060 4,950 110 F free samples given 2640 1,320 1,320 F total variable expense 11220 10,010 1,210 F Fixed expense Rent 1,300 1,300 0 N Sales salaries 1,300 1,300 0 N office salaries 800 800 0 N Depreciation-auto 400 400 0 N total fixed expense 3,800 3,800 0 N total expense 15,020 13,810 1,210 F

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