Purple Company uses flexible budgets to control its selling expenses. Monthly sa

Question

Purple Company uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $200,000 to $240,000. Variable costs and their percentage relationships to sales are:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>

Sales commissions 6%
Advertising 4%
Traveling 5%
Delivery 1%

Fixed selling expenses consist of Sales Salaries $39,000 and Depreciation on Delivery Equipment $10,000.

The actual variable selling expenses incurred in February, by Purple Company are as follows:

Sales commissions $13,700
Advertising 8,000
Traveling 11,300
Delivery 1,600

The actual fixed selling expenses incurred in February, consist of Sales Salaries $41,000 and Depreciation on Delivery Equipment $10,000.

Instructions:
Prepare a flexible budget performance report, assuming that February sales were $220,000. Expected and actual sales are the same.

Explanation / Answer

Flexible Actual Variance Sales 220000 220000 0 Less: Variable Expenses Sales commissions 13200 13700   
   500U Advertising 8800 8000    800F Traveling 11000    11300   
   300U Delivery 2200 1600    600F Less: Fixed Expenses Sales Salaries 39000 41000    2000U Depreciation 10000 10000 0 Net income 135800 134400      1400U

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