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.

Sales in units	7500	9000	1500	Favorable
Variable expenses
Sales commissions	1500	2160	660	Unfavorable
Advertising expense	750	630	120	Favorable
Travel expense	3000	3150	150	Unfavorable
Free samples given out	1125	990	135	Favorable
Total variable	6375	6930	555	Unfavorable
Fixed expenses
Rent	1000	1000	0	N
Sales salaries	1000	1000	0	N
Office salaries	600	600	0	N
Depreciation-autos (sales staff)	400	400	0	N
Total fixed	3000	3000	0	N
Total expenses	9375	9930	555	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. Do not leave any answer field blank. Enter 0 for amounts.)

Answer 1

	Budget	actual
Sales in units	9000	9000
Variable expenses
Sales commissions (1500/7500=0.20)	1800	2160	360	U
Advertising expense (750/7500=0.10)	900	630	270	F
Travel expense (3000/7500=0.40)	3600	3150	450	F
Free samples (1125/7500=0.15)	1350	990	360	F
Total variable expenses	7650	6930	720	F
Fixed expenses
Rent	1000	1000	0
Sales Salaries	1000	1000	0
Office salaries	600	600	0
Depreciation	400	400	0
Total fixed expenses	3000	3000	0
Total expenses	10650	9930	720	F