As sales manager, Joe Batista was given the following static budget report for s
ID: 2518473 • Letter: A
Question
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 Sales in units 7,500 10,000 2,500 Favorable Variable expenses Sales commissions $1,950 $2,500 $550 Unfavorable Advertising expense 1,050 900 150 Favorable Travel expense 3,000 4,500 1,500 Unfavorable Free samples given out 1,125 1,100 25 Favorable Total variable 7,125 9,000 1,875 Unfavorable Fixed expenses Rent 1,800 1,800 –0– Neither Favorable nor Unfavorable Sales salaries 1,200 1,200 –0– Neither Favorable nor Unfavorable Office salaries 700 700 –0– Neither Favorable nor Unfavorable Depreciation—autos (sales staff) 600 600 –0– Neither Favorable nor Unfavorable Total fixed 4,300 4,300 –0– Neither Favorable nor Unfavorable Total expenses $11,425 $13,300 $1,875 Unfavorable 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
Explanation / Answer
Answer:
SORIA COMPANY
Selling Expense Flexible Budget Report
Clothing Department
For the Month Ended October 31, 2017
Difference
Varable
Cost
per unit
Budget
Actual
Favorable (F)
Unfavorable (U)
Neither favorable
nor unfavorable (N)
Sales in units
10,000
10,000
Variable expenses
Sales commissions
0.26
2600
$2,500
$100
F
Advertising expense
0.14
1400
$900
$500
F
Travel expense
0.4
4000
$4,500
$500
U
Free samples given out
0.15
1500
$1,100
$400
F
Total variable
0.95
9500
$9,000
$500
F
Fixed expenses
Rent
1,800
1,800
0
Sales salaries
1,200
1,200
0
Office salaries
700
700
0
Depreciation—autos (sales staff)
600
600
0
Total fixed
4,300
4,300
0
Total Cost
13,800
13,300
500
F
Notes :
variable cost for 10,000 units are calculated by following formula
=Variable cost per units x 10,000 units
_____________________________________________
2
joe should have not been reprimanded as per the flexible budget report
Explanation
As we can see in the flexible budget report that there is a favorable variance of $ 500(which means actual cost is less than standard cost to be incurred)
SORIA COMPANY
Selling Expense Flexible Budget Report
Clothing Department
For the Month Ended October 31, 2017
Difference
Varable
Cost
per unit
Budget
Actual
Favorable (F)
Unfavorable (U)
Neither favorable
nor unfavorable (N)
Sales in units
10,000
10,000
Variable expenses
Sales commissions
0.26
2600
$2,500
$100
F
Advertising expense
0.14
1400
$900
$500
F
Travel expense
0.4
4000
$4,500
$500
U
Free samples given out
0.15
1500
$1,100
$400
F
Total variable
0.95
9500
$9,000
$500
F
Fixed expenses
Rent
1,800
1,800
0
Sales salaries
1,200
1,200
0
Office salaries
700
700
0
Depreciation—autos (sales staff)
600
600
0
Total fixed
4,300
4,300
0
Total Cost
13,800
13,300
500
F
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.