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, 2020
					Difference
	Budget		Actual		Favorable Unfavorable Neither Favorable nor Unfavorable
Sales in units	8,300		11,000		2,700	Favorable
Variable expenses
Sales commissions	$1,992		$2,860		$868	Unfavorable
Advertising expense	830		1,210		380	Unfavorable
Travel expense	3,320		3,850		530	Unfavorable
Free samples given out	1,992		1,430		562	Favorable
Total variable	8,134		9,350		1,216	Unfavorable
Fixed expenses
Rent	1,100		1,100		–0–	Neither Favorable nor Unfavorable
Sales salaries	1,200		1,200		–0–	Neither Favorable nor Unfavorable
Office salaries	900		900		–0–	Neither Favorable nor Unfavorable
Depreciation—autos (sales staff)	400		400		–0–	Neither Favorable nor Unfavorable
Total fixed	3,600		3,600		–0–	Neither Favorable nor Unfavorable
Total expenses	$11,734		$12,950		$1,216	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	11000	11000
Variable expenses
Sales commissions	2640	2860	220	Unfavorable
Advertising expense	1100	1210	110	Unfavorable
Travel expense	4400	3850	550	Favorable
Free samples	2640	1430	1210	Favorable
Total variable	10780	9350	1430	Favorable
Fixed expenses
Rent	1100	1100	0	Neither Favorable nor Unfavorable
Sales salaries	1200	1200	0	Neither Favorable nor Unfavorable
Office salaries	900	900	0	Neither Favorable nor Unfavorable
Depreciation—autos	400	400	0	Neither Favorable nor Unfavorable
Total fixed	3600	3600	0	Neither Favorable nor Unfavorable
Total expenses	14380	12950	1430	Favorable
Workings:
	Budget
Variable expenses:
Sales commissions	2640	=1992/8300*11000
Advertising expense	1100	=830/8300*11000
Travel expense	4400	=3320/8300*11000
Free samples	2640	=1992/8300*11000