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	8,200		11,000		2,800	Favorable
Variable expenses
Sales commissions	$1,804		$2,750		$946	Unfavorable
Advertising expense	820		990		170	Unfavorable
Travel expense	3,772		4,950		1,178	Unfavorable
Free samples given out	1,968		1,320		648	Favorable
Total variable	8,364		10,010		1,646	Unfavorable
Fixed expenses
Rent	1,300		1,300		–0–	Neither Favorable nor Unfavorable
Sales salaries	1,300		1,300		–0–	Neither Favorable nor Unfavorable
Office salaries	800		800		–0–	Neither Favorable nor Unfavorable
Depreciation—autos (sales staff)	400		400		–0–	Neither Favorable nor Unfavorable
Total fixed	3,800		3,800		–0–	Neither Favorable nor Unfavorable
Total expenses	$12,164		$13,810		$1,646	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	11,000	11,000
Variable expenses
sales commission		(1804/8200)		0.22	2420	2,750	330	U
advertising expense		(820/8200)		0.1	1100	990	110	F
travel expense		(3772/8200)		0.46	5060	4,950	110	F
free samples given		(1968/8200)		0.24	2640	1,320	1,320	F
total variable				1.02	11220	10,010	1,210	F
Fixed expenses
Rent					1,300	1,300	0	N
sales salaries					1,300	1,300	0	N
office salaries					800	800	0	N
Depreciation					400	400	0	N
total fixed					3,800	3,800	0	N
total expenses					15,020	13,810	1,210	F
		Budget = variable cost per unit*11000 units