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

$6.80

$210,000

$0.80

$185,000

$0.20

$140,000

$0.40

$120,000

$0.10

$64,000

$0.01

Expected unit sales in 2014 were 1,300,000, and 2014 total revenue was expected to be $13,000,000. Actual 2014 unit sales turned out to be 1,000,000, and total revenue was $10,000,000. Actual total costs in 2014 were:

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

  Credit and Collection Expense is ______

  Building Occupancy Expense is ______

Cost

Fixed

Variable (per unit sold)

Cost of Goods Sold

$0

$6.80

Selling and Promotion Expense

$210,000

$0.80

Building Occupancy Expense

$185,000

$0.20

Buying Expense

$140,000

$0.40

Delivery Expense

$120,000

$0.10

Credit and Collection Expense

$64,000

$0.01

Explanation / Answer

Both are favorable variances

Units           1,300,000             1,000,000 Fixed Variable Total Budget Actual Expense Variance Credit and Collection Expense $64,000 $13,000 $77,000 $55,000 $22,000 Building Occupancy Expense $185,000 $260,000 $445,000 $410,000 $35,000

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