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

$200,000

$0.80

$185,000

$0.10

$160,000

$0.30

$100,000

$0.05

$76,000

$0.02

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 1,100,000, and total revenue was $11,000,000. 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):

  Delivery Expense   :

  Cost of Goods Sold :

Cost

Fixed

Variable (per unit sold)

Cost of Goods Sold

$0

$6.80

Selling and Promotion Expense

$200,000

$0.80

Building Occupancy Expense

$185,000

$0.10

Buying Expense

$160,000

$0.30

Delivery Expense

$100,000

$0.05

Credit and Collection Expense

$76,000

$0.02

Explanation / Answer

Flexible Budget Variance Delivery Expense Actual Delivery Expense-((No of units Sold *Std Cost of Variable delivery Expense)+(Std Fixed delivery Expenses)) 160000-(1100000*.05+100000) Ans 1                                                                       5,000.00 Cost of Goods Sold Actual Cost of Goods Sold-No of units Sold *Std Cost of Goods sold per unit 6,000,000-(1100000*6.8) Ans 2                                                             -14,80,000.00

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