Question

Exercise 10-9 a

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	7,800		9,000		1,200	Favorable
Variable expenses
Sales commissions	$1,560		$2,160		$600	Unfavorable
Advertising expense	1,092		810		282	Favorable
Travel expense	3,276		3,600		324	Unfavorable
Free samples given out	1,170		1,080		90	Favorable
Total variable	7,098		7,650		552	Unfavorable
Fixed expenses
Rent	1,900		1,900		–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	4,400		4,400		–0–	Neither Favorable nor Unfavorable
Total expenses	$11,498		$12,050		$552	Unfavorabl

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 Report
			Difference
	Flexible Budget	Actual	Favorable Unfavorable Neither Favorable nor Unfavorable
Sales in units	9,000	9,000
Variable expenses
Sales commissions	1800	$2,160	$360	Unfavorable
Advertising expense	1260	810	$450	Favorable
Travel expense	3780	3,600	180	Favorable
Free samples given out	1350	1,080	270	Favorable
Total variable	8190	7,650	540	Favorable
Fixed expenses
Rent	1,900	1,900	–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	4,400	4,400	–0–	Neither Favorable nor Unfavorable
Total expenses	12,590	$12,050	$540	Favorable