You are given the following static budget report: Budget Actual Variance Unit Sa
ID: 2437333 • Letter: Y
Question
You are given the following static budget report:
Budget Actual Variance
Unit Sales 10,000 15,000 5,000 F
Variable Expenses:
Commissions $30,000 $33,000 $3,000 U
Advertising $1,000 $1,200 $200 U
Travel $10,000 $11,000 $1,000 U
Samples $2,500 $2,300 $200 F
Total Variable $43,500 47,500 $4,000 U
Fixed Expenses
Rent $5,000 $5,000 0
Salaries – Sales $2,000 $2,000 0
Salaries – Office $1,200 $1,200 0
Depreciation $1,500 $1,500 0
Total Fixed $9,700 $9,700 0
Total Expenses $53,200 $57,200 $4,000 U
Prepare a flexible budget analysis and explain whether you believe that costs were controlled. How do the results of the flexible budget differ from the results of the static budget?
Explanation / Answer
Answer
Variable expenses:
For 10,000 budgeted units
Per unit [based on 10,000 units]
For actual 15,000 units Flexible Budget
[A]
[B = A/ 10,000]
[C = B x 15,000 units]
Commission
$ 30,000.00
$ 3.00
$ 45,000.00
Advertising
$ 1,000.00
$ 0.10
$ 1,500.00
Travel
$ 10,000.00
$ 1.00
$ 15,000.00
Samples
$ 2,500.00
$ 0.25
$ 3,750.00
Total
$ 43,500.00
$ 4.35
$ 65,250.00
Budget
Actual
Variance
Units Sales
15000
5000
Variable expenses:
Commission
$ 45,000.00
$ 33,000.00
$ 12,000.00
Favourable
Advertising
$ 1,500.00
$ 1,200.00
$ 300.00
Favourable
Travel
$ 15,000.00
$ 11,000.00
$ 4,000.00
Favourable
Samples
$ 3,750.00
$ 2,300.00
$ 1,450.00
Favourable
Total Variable
$ 65,250.00
$ 47,500.00
$ 17,750.00
Favourable
Fixed expenses:
Rent
$ 5,000.00
$ 5,000.00
$ -
Neither F nor U
Salaries Sales
$ 2,000.00
$ 2,000.00
$ -
Neither F nor U
Salaries Office
$ 1,200.00
$ 1,200.00
$ -
Neither F nor U
Depreciation
$ 1,500.00
$ 1,500.00
$ -
Neither F nor U
Total Fixed
$ 9,700.00
$ 9,700.00
$ -
Neither F nor U
Total Expenses
$ 74,950.00
$ 57,200.00
$ 17,750.00
Favourable
Variable expenses:
For 10,000 budgeted units
Per unit [based on 10,000 units]
For actual 15,000 units Flexible Budget
[A]
[B = A/ 10,000]
[C = B x 15,000 units]
Commission
$ 30,000.00
$ 3.00
$ 45,000.00
Advertising
$ 1,000.00
$ 0.10
$ 1,500.00
Travel
$ 10,000.00
$ 1.00
$ 15,000.00
Samples
$ 2,500.00
$ 0.25
$ 3,750.00
Total
$ 43,500.00
$ 4.35
$ 65,250.00
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