Question

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):

Answer 1

	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