Four Flags is a retail department store. On January 1, 2015, Four Flags\' accoun

Question

Four Flags is a retail department store. On January 1, 2015, Four Flags' accountants used the following data to develop the master budget for Four Flags for 2015:

Fixed

Variable (per unit sold)

$0

$6.80

$200,000

$0.80

$185,000

$0.20

$145,000

$0.30

$110,000

$0.05

$80,000

$0.02

Expected unit sales in 2015 were 1,250,000, and 2015 total revenue was expected to be $12,500,000. Actual 2015 unit sales turned out to be 1,050,000, and total revenue was $10,500,000. Actual total costs in 2015 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):

  Building Occupancy 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

$0.20

Buying Expense

$145,000

$0.30

Delivery Expense

$110,000

$0.05

Credit and Collection Expense

$80,000

$0.02

Explanation / Answer

Working:

Flexible budget Actual Variances Building occupency expense $ 395,000 $ 360,000 $ 35,000 Favorable Cost of goods sold $ 7,140,000 $ 6,000,000 $ 1,140,000 Favorable

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