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 7,900 10,000 2,100 Favorable Variable expenses Sales commissions $1,896 $2,400 $504 Unfavorable Advertising expense 1,027 800 227 Favorable Travel expense 3,160 4,500 1,340 Unfavorable Free samples given out 1,185 1,300 115 Unfavorable Total variable 7,268 9,000 1,732 Unfavorable Fixed expenses Rent 1,200 1,200 –0– Neither Favorable nor Unfavorable Sales salaries 1,400 1,400 –0– Neither Favorable nor Unfavorable Office salaries 600 600 –0– Neither Favorable nor Unfavorable Depreciation—autos (sales staff) 500 500 –0– Neither Favorable nor Unfavorable Total fixed 3,700 3,700 –0– Neither Favorable nor Unfavorable Total expenses $10,968 $12,700 $1,732 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

Selling Expense Flexible Budget Report
For the Month Ended October 31, 2020
	Budget	Actual	Difference
Sales in units	10000	10000
Variable costs:
Sales commissions	2400	2400	0	Neither Favorable nor Unfavorable
Advertising expense	1300	800	500	Favorable
Travel expense	4000	4500	500	Unfavorable
Free samples	1500	1300	200	Favorable
Total variable costs	9200	9000	200	Favorable
Fixed costs:
Rent	1200	1200	0	Neither Favorable nor Unfavorable
Sales salaries	1400	1400	0	Neither Favorable nor Unfavorable
Office salaries	600	600	0	Neither Favorable nor Unfavorable
Depreciation—autos	500	500	0	Neither Favorable nor Unfavorable
Total fixed costs	3700	3700	0	Neither Favorable nor Unfavorable
Total costs	12900	12700	200	Favorable