Four Flags is a retail department store. On January 1, 2012, Four Flags\' accoun
ID: 2374367 • Letter: F
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:
COSTS FIXED Variable (per unit sold)
Cost of goods sold $0 $5.60
Selling and promotion expense $220,000 $0.80
Building occupancy expense $190,000 $0.10
Buying expense $145,000 $0.30
Delivery expense $100,000 $0.10
Credit & Collection expense $70,000 $0.03
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 1,000,000, and total revenue was $10,000,000. Actual costs in 2012 were:
Cost of goods sold $6,000,000
Selling and promotion expense $1,000,000
Building occupancy expense $450,000
Buying expense $610,000
Delivery expense $180,000
Credit & Collection expense $60,000
Compute the flexible-budget variances for the following two cost items (enter favorable variances as positive numbers and unfavorable variances as negative numbers):
Building Occupancy Expense: ______
Buying Expense: _______
Explanation / Answer
Actual Unit Sold = 1,000,000
Flexible Budget Actual budget Variance
Building Occupancy Exp. 290,000 450,000 Under 160,000
Buying Expenses 445,000 610,000 Under 165,000
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