Question

# Four Flags is a retail department store. On January 1, 2019, Four Flags' accountants used the...

Four Flags is a retail department store. On January 1, 2019, Four Flags' accountants used the following data to develop the master budget for Four Flags for 2019: Cost Fixed Variable (per sales dollar) Cost of Goods Sold \$0 \$0.660 Selling and Promotion Expense \$205,000 \$0.080 Building Occupancy Expense \$180,000 \$0.020 Buying Expense \$145,000 \$0.050 Delivery Expense \$120,000 \$0.010 Credit and Collection Expense \$72,000 \$0.002 Expected unit sales in 2019 were 1,200,000, and 2019 total revenue was expected to be \$12,000,000. Actual 2019 unit sales turned out to be 1,050,000, and total revenue was \$10,500,000. Actual total costs in 2019 were: Cost of Goods Sold \$6,000,000 Selling and Promotion Expense \$1,100,000 Building Occupancy Expense \$320,000 Buying Expense \$520,000 Delivery Expense \$190,000 Credit and Collection Expense \$75,000 Required Compute the flexible budget variances in 2019 for the following two cost items (NOTE: enter favorable variances as positive numbers and unfavorable variances as negative numbers):

 Actual results Flexible budget Flexible budget variance Cost of goods sold \$6,000,000 \$6,930,000 (10,500,000*\$0.660) \$930,000 Favorable Selling and promotion expense 1,100,000 1,045,000 (10,500,000*\$0.080+205,000) 55,000 Unfavorable Building occupancy expense 320,000 390,000 (10,500,000*\$0.020+180,000) 70,000 Favorable Buying expense 520,000 670,000 (10,500,000*\$0.050+145,000) 150,000 Favorable Delivery expense 190,000 225,000 (10,500,000*\$0.010+120,000) 35,000 Favorable Credit and collection expense 75,000 93,000 (10,500,000*\$0.002+72,000) 18,000 Favorable

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