Question

Question 1

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, 2017
					Difference
	Budget		Actual		Favorable Unfavorable Neither Favorable nor Unfavorable
Sales in units	7,500		11,000		3,500	Favorable
Variable expenses
Sales commissions	$1,950		$2,970		$1,020	Unfavorable
Advertising expense	975		1,210		235	Unfavorable
Travel expense	3,600		3,850		250	Unfavorable
Free samples given out	1,200		1,540		340	Unfavorable
Total variable	7,725		9,570		1,845	Unfavorable
Fixed expenses
Rent	1,500		1,500		–0–	Neither Favorable nor Unfavorable
Sales salaries	1,300		1,300		–0–	Neither Favorable nor Unfavorable
Office salaries	900		900		–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	$12,025		$13,870		$1,845	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.)

SORIA COMPANY Selling Expense Flexible Budget Report Clothing Department For the Month Ended October 31, 2017
						Difference
		Budget		Actual		Favorable Unfavorable Neither Favorable nor Unfavorable
Total Fixed CostsTotal Variable CostsFree SamplesOffice SalariesTravel ExpenseVariable CostsSales in UnitsAdvertising ExpenseDepreciation—Sale Staff AutosFixed CostsRentSales CommissionsSales SalariesTotal Costs
Free SamplesDepreciation—Sale Staff AutosSales SalariesFixed CostsRentVariable CostsSales CommissionsAdvertising ExpenseTravel ExpenseOffice SalariesSales in UnitsTotal CostsTotal Fixed CostsTotal Variable Costs
Office SalariesTotal Variable CostsDepreciation—Sale Staff AutosSales SalariesFixed CostsTravel ExpenseRentSales CommissionsVariable CostsFree SamplesAdvertising ExpenseSales in UnitsTotal CostsTotal Fixed Costs		$		$		$	Neither Favorable nor UnfavorableUnfavorableFavorable
Office SalariesFixed CostsFree SamplesRentTotal Variable CostsSales CommissionsAdvertising ExpenseTravel ExpenseSales in UnitsSales SalariesTotal CostsTotal Fixed CostsVariable CostsDepreciation—Sale Staff Autos							UnfavorableFavorableNeither Favorable nor Unfavorable
Sales SalariesTotal Fixed CostsAdvertising ExpenseTotal CostsDepreciation—Sale Staff AutosSales CommissionsTotal Variable CostsSales in UnitsTravel ExpenseFixed CostsFree SamplesVariable CostsOffice SalariesRent							UnfavorableFavorableNeither Favorable nor Unfavorable
Total Variable CostsSales in UnitsDepreciation—Sale Staff AutosFixed CostsFree SamplesSales SalariesAdvertising ExpenseTravel ExpenseOffice SalariesRentVariable CostsSales CommissionsTotal CostsTotal Fixed Costs							UnfavorableFavorableNeither Favorable nor Unfavorable
Total Fixed CostsSales CommissionsFixed CostsTotal CostsRentSales in UnitsOffice SalariesSales SalariesTotal Variable CostsTravel ExpenseVariable CostsDepreciation—Sale Staff AutosAdvertising ExpenseFree Samples							UnfavorableNeither Favorable nor UnfavorableFavorable
Office SalariesFree SamplesTotal Variable CostsSales CommissionsAdvertising ExpenseSales SalariesTotal Fixed CostsDepreciation—Sale Staff AutosTravel ExpenseRentFixed CostsVariable CostsSales in UnitsTotal Costs
Free SamplesTotal Fixed CostsSales SalariesOffice SalariesTotal CostsTravel ExpenseTotal Variable CostsVariable CostsAdvertising ExpenseDepreciation—Sale Staff AutosRentFixed CostsSales in UnitsSales Commissions							Neither Favorable nor UnfavorableUnfavorableFavorable
Office SalariesTravel ExpenseSales in UnitsSales SalariesTotal Fixed CostsRentFixed CostsFree SamplesSales CommissionsTotal Variable CostsTotal CostsVariable CostsAdvertising ExpenseDepreciation—Sale Staff Autos							UnfavorableFavorableNeither Favorable nor Unfavorable
Total CostsVariable CostsSales in UnitsSales SalariesTotal Fixed CostsTotal Variable CostsFree SamplesAdvertising ExpenseTravel ExpenseDepreciation—Sale Staff AutosSales CommissionsFixed CostsOffice SalariesRent							UnfavorableNeither Favorable nor UnfavorableFavorable
Office SalariesTotal Variable CostsSales CommissionsTravel ExpenseSales in UnitsSales SalariesFixed CostsDepreciation—Sale Staff AutosRentTotal CostsTotal Fixed CostsVariable CostsAdvertising ExpenseFree Samples							FavorableNeither Favorable nor UnfavorableUnfavorable
Sales SalariesSales in UnitsTotal CostsTotal Variable CostsTotal Fixed CostsDepreciation—Sale Staff AutosTravel ExpenseSales CommissionsFixed CostsVariable CostsAdvertising ExpenseFree SamplesOffice SalariesRent							UnfavorableFavorableNeither Favorable nor Unfavorable
Variable CostsTravel ExpenseTotal Fixed CostsSales in UnitsTotal Variable CostsAdvertising ExpenseOffice SalariesDepreciation—Sale Staff AutosFixed CostsFree SamplesRentSales CommissionsSales SalariesTotal Costs		$		$		$

Answer 1

SORIA COMPANY
Selling Expense Flexible Budget Report
For the Month Ended October 31, 2017
	Budget	Actual	Difference
Sales in units	11000	11000
Variable costs:
Sales commissions	2860	2970	110	Unfavorable
Advertising expense	1430	1210	220	Favorable
Travel expense	5280	3850	1430	Favorable
Free samples	1760	1540	220	Favorable
Total variable expenses	11330	9570	1760	Favorable
Fixed costs:
Rent	1500	1500	0	Neither Favorable nor Unfavorable
Sales salaries	1300	1300	0	Neither Favorable nor Unfavorable
Office salaries	900	900	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	15630	13870	1760	Favorable
Workings:
	Budget
Sales commissions	2860	=1950/7500*11000
Advertising expense	1430	=975/7500*11000
Travel expense	5280	=3600/7500*11000
Free samples given	1760	=1200/7500*11000