Four Flags is a retail department store. On January 1, 2014, Four Flags\' accoun

Question

Four Flags is a retail department store. On January 1, 2014, Four Flags' accountants used the following data to develop the master budget for Four Flags for 2014:

Fixed

Variable (per unit sold)

$0

$5.20

$215,000

$0.80

$185,000

$0.20

$150,000

$0.30

$120,000

$0.10

$64,000

$0.03

Expected unit sales in 2014 were 1,200,000, and 2014 total revenue was expected to be $12,000,000. Actual 2014 unit sales turned out to be 1,050,000, and total revenue was $10,500,000. Actual total costs in 2014 were:

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

  Building Occupancy Expense   _____________

  Selling and Promotion Expense   _____________

Cost

Fixed

Variable (per unit sold)

Cost of Goods Sold

$0

$5.20

Selling and Promotion Expense

$215,000

$0.80

Building Occupancy Expense

$185,000

$0.20

Buying Expense

$150,000

$0.30

Delivery Expense

$120,000

$0.10

Credit and Collection Expense

$64,000

$0.03

Explanation / Answer

Building Occupancy Expenses flexible budget Variance = Actual Quantity x standard rate - actual cost =395000 - 340,000=55,000 F Building Occupancy Flexible budget expenses = actual quantity x Standard Rate = 1,050,000 x 0.20 +185,000 =395000 Selling and Promotion Expense flexible budget Variance = Actual Quantity x standard rate - actual cost =1,055,000-900,000 =155,000 F Selling and PromotionFlexible budget expenses = actual quantity x Standard Rate = 1,050,000 x 0.80 +215,000 =1,055,000 Answer: Building Occupancy Expense 55,000 F Selling and Promotion Expense 155,000 F

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