Question

As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Monty Company for the month of October. Monty 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. (List variable costs before fixed costs.)

Answer 1

							difference
					Budget	actual
Sales in units				per unit	10,000	10,000
Variable expenses
sales commission		1950/7500		0.26	2600	2,500	100	F
advertising expense		1050/7500		0.14	1400	900	500	F
travel expense		3000/7500		0.4	4000	4,500	500	U
free samples given		1125/7500		0.15	1500	1,100	400	F
total variable				0.95	9500	9,000	500	F
Fixed expenses
Rent					1,800	1,800	0	N
sales salaries					1,200	1,200	0	N
office salaries					700	700	0	N
Depreciation					600	600	0	N
total fixed					4,300	4,300	0	N
total expenses					13,800	13,300	500	F