Exercise 188 Cadiz Co. uses flexible budgets to control its selling expenses. Mo

Question

Exercise 188

Cadiz Co. uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $300,000 to $360,000. Variable costs and their percentage relationships to sales are:

Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment $10,000.

The actual selling expenses incurred in February, 2016, by Cadiz are as follows:

Fixed selling expenses consist of sales salaries $41,500 and depreciation on delivery equipment $10,000.

Prepare a flexible budget performance report, assuming that February sales were $330,000. (List variable expenses before fixed expenses.)

Explanation / Answer

Budget Actual 330000 330000 Variable expenses Sales commissions 16500 17200 700 U Advertising 13200 12000 1200 F Traveling 23100 23700 600 U Delivery 3300 2400 900 F Total variable expenses 56100 55300 800 F Fixed expenses Sales salaries 40000 41500 1500 U Depreciation 10000 10000 0 NA Total fixed expenses 50000 51500 1500 U Total expenses 106100 106800 700 U

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