Four Flags is a retail department store. On January 1, 2012, Four Flags\' accoun

Question

Four Flags is a retail department store. On January 1, 2012, Four Flags' accountants used the following data to develop the master budget for Four Flags for 2012:

Expected unit sales in 2012 were 1,300,000, and 2012 total revenue was expected to be $13,000,000. Actual 2012 unit sales turned out to be 1,050,000, and total revenue was $10,500,000. Actual costs in 2012 were:

Required
Compute the flexible-budget variances for the following two cost items (enter favorable variances as positive numbers and unfavorable variances as negative numbers):

*In this problem, you must create the flexible budget and flexible budget variances for two cost items.

1) Credit and Collection Expense?

2) Cost of Goods Sold ?

Cost Fixed Variable (per unit sold) Cost of Goods Sold $0 $5.60 Selling and Promotion Expense $210,000 $0.80 Building Occupancy Expense $190,000 $0.10 Buying Expense $140,000 $0.30 Delivery Expense $105,000 $0.05 Credit and Collection Expense $78,000 $0.02

Explanation / Answer

1) Credit and Collection Expense?

=(78000+0.02*1050000 - 20,000) = 79000 Favorable

2) Cost of Goods Sold ?

= (5.60*1050,000 - 6,000,000) = $120,000 unfavorable

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