Question

Exercise 10-9 a 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, 2020 Difference Budget Actual Favorable Unfavorable Neither Favorable nor Unfavorable Sales in units 8,100 10,000 1,900 Favorable Variable expenses     Sales commissions $1,944 $2,700 $756 Unfavorable     Advertising expense 972 700 272 Favorable     Travel expense 3,240 4,000 760 Unfavorable     Free samples given out 1,458 1,400 58 Favorable        Total variable 7,614 8,800 1,186 Unfavorable Fixed expenses      Rent 1,900 1,900 –0– Neither Favorable nor Unfavorable      Sales salaries 1,400 1,400 –0– Neither Favorable nor Unfavorable      Office salaries 800 800 –0– Neither Favorable nor Unfavorable      Depreciation—autos (sales staff) 400 400 –0– Neither Favorable nor Unfavorable        Total fixed 4,500 4,500 –0– Neither Favorable nor Unfavorable Total expenses $12,114 $13,300 $1,186 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. (List variable costs before fixed costs.)

Answer 1

	Budget	Actual	Difference
Sales in units	10000	10000
Variable expenses
Sales commissions	2400	2700	300	Unfavorable
Advertising expense	1200	700	500	Favorable
Travel expense	4000	4000	0	Neither Favorable nor Unfavorable
Free samples	1800	1400	400	Favorable
Total variable	9400	8800	600	Favorable
Fixed expenses
Rent	1900	1900	0	Neither Favorable nor Unfavorable
Sales salaries	1400	1400	0	Neither Favorable nor Unfavorable
Office salaries	800	800	0	Neither Favorable nor Unfavorable
Depreciation—autos (sales staff)	400	400	0	Neither Favorable nor Unfavorable
Total fixed	4500	4500	0	Neither Favorable nor Unfavorable
Total expenses	13900	13300	600	Favorable
Workings:
Variable expenses
Sales commissions	2400	=1944/8100*10000
Advertising expense	1200	=972/8100*10000
Travel expense	4000	=3240/8100*10000
Free samples	1800	=1458/8100*10000