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 Sales in units 7,700 11,000 3,300 Favorable Variable expenses Sales commissions $1,848 $2,640 $792 Unfavorable Advertising expense 924 990 66 Unfavorable Travel expense 3,542 4,400 858 Unfavorable Free samples given out 1,848 1,210 638 Favorable Total variable 8,162 9,240 1,078 Unfavorable Fixed expenses Rent 1,400 1,400 –0– Neither Favorable nor Unfavorable Sales salaries 1,000 1,000 –0– Neither Favorable nor Unfavorable Office salaries 900 900 –0– Neither Favorable nor Unfavorable Depreciation—autos (sales staff) 400 400 –0– Neither Favorable nor Unfavorable Total fixed 3,700 3,700 –0– Neither Favorable nor Unfavorable Total expenses $11,862 $12,940 $1,078 Unfavorable 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 $ $ $ $ $ $

Explanation / Answer

SORIA COMPANY Selling Expense Flexible Budget Report budgeted Revised budget based on actual Sales Quanity Actual Difference Remarks Sales in units 7700 11000 11000 3300 Favourable Variable Expenses Sales Commission 1848 2640 2640 0 Neither Favourable nor Unfavourable advertisement expense 924 1320 990 330 Favourable Travelling Expense 3542 5060 4400 660 Favourable Samples Given out 1848 2640 1210 1430 Favourable Total Variable expenses 8162 11660 9240 2420 Favourable Fixed Expenses All Fixed Expenses Variances are correctly calculated as Fixed variance does not change with level of activity in Sales So, Total expense variance will remain the same as total variable expenses variance

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