Four Flags is a retail department store. On January 1, 2012, Four Flags\' accoun
ID: 2374498 • 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:
Expected unit sales in 2012 were 1,200,000, and 2012 total revenue was expected to be $12,000,000. Actual 2012 unit sales turned out to be 1,050,000, and total revenue was $10,500,000. Actual total 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):
Credit and Collection Expense
Selling and Promotion Expense
Please make sure you have the right answer :)
Cost Fixed Variable (per unit sold) Cost of Goods Sold $0 $5.40 Selling and Promotion Expense $200,000 $0.80 Building Occupancy Expense $185,000 $0.20 Buying Expense $145,000 $0.50 Delivery Expense $100,000 $0.05 Credit and Collection Expense $76,000 $0.02Explanation / Answer
Actual Unit = 1,050,000
Flexible budget for Credit and Collection Expense
= 76,000 + 1,050,000 * 0.02
= 97,000
Actual Expense
= 25,000
Variance
= Flexible - Actual
= 97,000 - 25,000
= 72,000 (Favor)
Flexible budget for Selling Promotion Expense
= 200,000 + 1,050,000 * 0.8
= 1,040,000
Actual Expense
= 1,100,000
Variance
= Flexible - Actual
= 1,040,000 - 1,100,000
= - 60,000 ( Unfavor)
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