Question

Exercise 22-9

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
Sales in units	8,500		10,000		1,500	Favorable
Variable expenses
Sales commissions	$2,380		$2,600		$220	Unfavorable
Advertising expense	850		900		50	Unfavorable
Travel expense	3,910		3,500		410	Favorable
Free samples given out	1,615		1,100		515	Favorable
Total variable	8,755		8,100		655	Favorable
Fixed expenses
Rent	1,700		1,700		–0–	Neither Favorable nor Unfavorable
Sales salaries	1,000		1,000		–0–	Neither Favorable nor Unfavorable
Office salaries	600		600		–0–	Neither Favorable nor Unfavorable
Depreciation—autos (sales staff)	500		500		–0–	Neither Favorable nor Unfavorable
Total fixed	3,800		3,800		–0–	Neither Favorable nor Unfavorable
Total expenses	$12,555		$11,900		$655	Favorable

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.)

Answer 1

							difference
					Budget	actual
Sales in units				per unit	10,000	10,000
Variable expenses
sales commission		2380/8500		0.28	2800	2,600	200	F
advertising expense		850/8500		0.1	1000	900	100	F
travel expense		3910/8500		0.46	4600	3,500	1,100	F
free samples given		1615/8500		0.19	1900	1,100	800	F
total variable				1.03	10300	8,100	2,200	F
Fixed expenses
Rent					1,700	1,700	0	N
sales salaries					1,000	1,000	0	N
office salaries					600	600	0	N
Depreciation					500	500	0	N
total fixed					3,800	3,800	0	N
total expenses					14,100	11,900	2,200	F