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 7,800 10,000 2,200 Favorable Variable expenses Sales commissions $2,184 $2,400 $216 Unfavorable Advertising expense 1,092 1,000 92 Favorable Travel expense 3,432 4,500 1,068 Unfavorable Free samples given out 1,560 1,100 460 Favorable Total variable 8,268 9,000 732 Unfavorable Fixed expenses Rent 1,700 1,700 –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) 600 600 –0– Neither Favorable nor Unfavorable Total fixed 4,300 4,300 –0– Neither Favorable nor Unfavorable Total expenses $12,568 $13,300 $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

SORIA COMPANY
Selling Expense Flexible Budget Report
For the Month Ended October 31, 2020
	Budget	Actual	Difference
Sales in units	10000	10000
Variable costs:
Sales commissions	2800	2400	400	Favorable
Advertising expense	1400	1000	400	Favorable
Travel expense	4400	4500	100	Unfavorable
Free samples	2000	1100	900	Favorable
Total variable expenses	10600	9000	1600	Favorable
Fixed costs:
Rent	1700	1700	0	Neither Favorable nor Unfavorable
Sales salaries	1400	1400	0	Neither Favorable nor Unfavorable
Office salaries	600	600	0	Neither Favorable nor Unfavorable
Depreciation—Sales Staff autos	600	600	0	Neither Favorable nor Unfavorable
Total fixed expenses	4300	4300	0	Neither Favorable nor Unfavorable
Total expenses	14900	13300	1600	Favorable
Workings:
	Budget
Sales commissions	2800	=2184/7800*10000
Advertising expense	1400	=1092/7800*10000
Travel expense	4400	=3432/7800*10000
Free samples given	2000	=1560/7800*10000