Exercise 24-9 As sales manager, Joe Batista was given the following static budge

Question

Exercise 24-9

As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Soria Company for the month of October.

SORIA COMPANY
Clothing Department
Budget Report
For the Month Ended October 31, 2017

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

8,000

10,000

2,000

$2,400

$2,600

$200

720

850

130

3,600

4,100

500

1,600

1,400

200

8,320

8,950

630

1,500

1,500

–0–

1,200

1,200

–0–

800

800

–0–

500

500

–0–

4,000

4,000

–0–

$12,320

$12,950

$630

As a result of this budget report, Joe was called into the president’s office and congratulated on his fine sales performance. He was reprimanded, however, for allowing his costs to get out of control. Joe knew something was wrong with the performance report that he had been given. However, he was not sure what to do, and comes to you for advice.

Prepare a budget report based on flexible budget data to help Joe. (List variable costs before fixed costs. Do not leave any answer field blank. Enter 0 for amounts.)

SORIA COMPANY
Selling Expense Flexible Budget Report
Clothing Department
For the Month Ended October 31, 2017

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

SORIA COMPANY
Clothing Department
Budget Report
For the Month Ended October 31, 2017

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

Sales in units

8,000

10,000

2,000

Favorable Variable expenses     Sales commissions

$2,400

$2,600

$200

Unfavorable     Advertising expense

720

850

130

Unfavorable     Travel expense

3,600

4,100

500

Unfavorable     Free samples given out

1,600

1,400

200

Favorable        Total variable

8,320

8,950

630

Unfavorable Fixed expenses      Rent

1,500

1,500

–0–

Neither Favorable nor Unfavorable      Sales salaries

1,200

1,200

–0–

Neither Favorable nor Unfavorable      Office salaries

800

800

–0–

Neither Favorable nor Unfavorable      Depreciation—autos (sales staff)

500

500

–0–

Neither Favorable nor Unfavorable        Total fixed

4,000

4,000

–0–

Neither Favorable nor Unfavorable Total expenses

$12,320

$12,950

$630

Unfavorable

Explanation / Answer

SORIA COMPANY

SORIA COMPANY

SORIA COMPANY

Clothing Department Budget Report For the Month Ended October 31, 2017 Difference Favorable Budget Budgeted   Actual Unfavorable Cost Per unit Neither Favorable   nor Unfavorable Sales in units            8,000        10,000                                                               2,000 Favorable Variable expenses     Sales commissions            2,400                     0.30          2,600                                                                   200 Unfavorable     Advertising expense                720                     0.09              850                                                                   130 Unfavorable     Travel expense            3,600                     0.45          4,100                                                                   500 Unfavorable     Free samples given out            1,600                     0.20          1,400                                                                   200 Favorable        Total variable            8,320                     1.04          8,950                                                                   630 Unfavorable Fixed expenses      Rent            1,500          1,500 –0– Neither Favorable nor Unfavorable      Sales salaries            1,200          1,200 –0– Neither Favorable nor Unfavorable      Office salaries                800              800 –0– Neither Favorable nor Unfavorable      Depreciation—autos (sales staff)                500              500 –0– Neither Favorable nor Unfavorable        Total fixed            4,000          4,000 –0– Neither Favorable nor Unfavorable Total expenses          12,320        12,950                                                                   630 Unfavorable

SORIA COMPANY

Clothing Department Budget Report For the Month Ended October 31, 2017 Details Flexible Budget Oct ,17 Amt$ Actual Amt $ Oct ,17   Variance Sales in units          10,000                 10,000 Amt $ Favorable/Unfaborable/Neither Favorable Nor Unfavorable Variable expenses     Sales commissions            3,000                   2,600       400 Favorable     Advertising expense                900                       850         50 Favorable     Travel expense            4,500                   4,100       400 Favorable     Free samples given out            2,000                   1,400       600 Favorable        Total variable          10,400                   8,950 1,450 Favorable Fixed expenses      Rent            1,500                   1,500          -   Neither Favorable nor Unfavorable      Sales salaries            1,200                   1,200          -   Neither Favorable nor Unfavorable      Office salaries                800                       800          -   Neither Favorable nor Unfavorable      Depreciation—autos (sales staff)                500                       500          -   Neither Favorable nor Unfavorable        Total fixed            4,000                   4,000          -   Neither Favorable nor Unfavorable Total expenses          14,400                 12,950 1,450 Favorable So there is actually a favorable variancce of $1,450 in Oct for Joe's sales division

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