Question

Answer the following questions:

e. How much of the master budget variance for Commissions Exp. was caused by an unanticipated increase in volume?__________________ F or U?

f. How much of the master budget variance for Advertising Expenses was caused by an unanticipated increase in volume?__________________ F or U?

g. How much of the master budget variance for CGS was caused by some factor other than volume? (Hint: this is NOT a manufacturing business). $__________ F or U? What could account for this variance?

h. How much of the master budget variance for Sales Revenue was caused by some factor other than volume? $__________ F or U? What could account for this variance?

i. How much of the master budget variance for Advertising Exp. was caused by some factor other than volume? $__________ F or U? What could account for this variance?

Flexible Budget Performanc Actual Flexible Budger Master Budget Volume 21460 21460 20000 Sales Revenue 1131020 1073000 1000000 Less: Variable Expense COGS 682880 643800 600000 Sales Commission 58685 53650 50000 44213 Shipping Expenses Bad debt Expense 42920 40000 16930 9657 9000 328312 Contribution 322973 301000 Less: Fixed Cost 43000 40000 Salaries 40000 Lease on Dost Center 15500 17000 17000 12000 12000 12000 Deprec on equipment Advertising Office Rent, phone 7750 10000 10000 12300 11000 11000 232973 Operating Income 237762 211000

Answer 1

e. Master budget variance for Commissions Exp. caused by an unanticipated increase in volume:

Volume variance from Master Budget= 21460-20000= 1460 units of sale

Commission Variance

Master Budget on Actual sales commission= 50000/20000*21460= $64,380

Actual Cost being= $58685

Variance= 64380-58685= $5695 F

f. Advertisement

Master Budget on Actual Advertisement= 10000/20000*21460=$10730

Actual Adv. cost being= 7750

Variance= 10730-7750=$2980 F

g. COGS Variance:

Variance from Master= $682880-600000= $82880

Variance from Flexible=$643800-600000= $43800

Therefore Variance other than volume factor will be= 82880- 43800= $39080 U (May be higher Inventory cost)

h. Sales Revenue Variance Other than Volume factor:

1131020-1073000= $58020 F

i. Advertising Variance other than from Volume:

Flexible budget - Actuals= 10000-7750= $2250 F