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. Clothing Department Budget Report For the Month Ended October 31, 2020
					Difference
	Budget		Actual		Favorable Unfavorable Neither Favorable nor Unfavorable
Sales in units	8,000		10,000		2,000	Favorable
Variable expenses
Sales commissions	$2,400		$2,600		$200	Unfavorable
Advertising expense	720		850		130	Unfavorable
Travel expense	3,600		4,100		500	Unfavorable
Free samples given out	1,600		1,400		200	Favorable
Total variable	8,320		8,950		630	Unfavorable
Fixed expenses
Rent	1,500		1,500		–0–	Neither Favorable nor Unfavorable
Sales salaries	1,200		1,200		–0–	Neither Favorable nor Unfavorable
Office salaries	800		800		–0–	Neither Favorable nor Unfavorable
Depreciation—autos (sales staff)	500		500		–0–	Neither Favorable nor Unfavorable
Total fixed	4,000		4,000		–0–	Neither Favorable nor Unfavorable
Total expenses	$12,320		$12,950		$630	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.

Answer 1

							difference
					Budget	actual
Sales in units				per unit	10,000	10,000
Variable expenses
sales commission		2400/8000		0.3	3000	2,600	400	F
advertising expense		720/8000		0.09	900	850	50	F
travel expense		3600/8000		0.45	4500	4,100	400	F
free samples given		1600/8000		0.2	2000	1,400	600	F
total variable				1.04	10400	8,950	1,450	F
Fixed expenses
Rent					1,500	1,500	0	N
sales salaries					1,200	1,200	0	N
office salaries					800	800	0	N
Depreciation					500	500	0	N
total fixed					4,000	4,000	0	N
total expenses					14,400	12,950	1,450	F
		Budget = variable cost per unit*10000 units