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 1,250,000, and 2012 total revenue was expected to be $12,500,000. Actual 2012 unit sales turned out to be 1,100,000, and total revenue was $11,000,000. 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):

  Cost of Goods Sold   

  Buying Expense   

Please show Step by step how to solve

Thank you

Cost Fixed Variable (per unit sold) Cost of Goods Sold $0 $6.20 Selling and Promotion Expense $200,000 $0.80 Building Occupancy Expense $180,000 $0.10 Buying Expense $160,000 $0.40 Delivery Expense $115,000 $0.10 Credit and Collection Expense $68,000 $0.02

Explanation / Answer

Hi,

Please find the answer as follows:

Cost of Goods Sold = 1100000*6.2 - 6000000 = 820000 (Unfavorable) or -820000

Buying Expense = 160000 + 1100000*.40 - 600000 = 0

Thanks.

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