Question

As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Crane Company for the month of October.

CRANE COMPANY Clothing Department Budget Report For the Month Ended October 31, 2020
					Difference
	Budget		Actual		Favorable Unfavorable Neither Favorable nor Unfavorable
Sales in units	7,500		9,000		1,500	Favorable
Variable expenses
Sales commissions	$1,500		$2,160		$660	Unfavorable
Advertising expense	750		630		120	Favorable
Travel expense	3,000		3,150		150	Unfavorable
Free samples given out	1,125		990		135	Favorable
Total variable	6,375		6,930		555	Unfavorable
Fixed expenses
Rent	1,000		1,000		–0–	Neither Favorable nor Unfavorable
Sales salaries	1,000		1,000		–0–	Neither Favorable nor Unfavorable
Office salaries	600		600		–0–	Neither Favorable nor Unfavorable
Depreciation—autos (sales staff)	400		400		–0–	Neither Favorable nor Unfavorable
Total fixed	3,000		3,000		–0–	Neither Favorable nor Unfavorable
Total expenses	$9,375		$9,930		$555	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

	Workings	Budget	Actual	Differences
Sales in units	(q)	9,000	9,000	0	Neither favorable nor unfavorable
Variable costs:
Sales Commission	($1500 / 7500) X 900	1,800	$       2,160	$             360	Unfavorable
Advertising expense	($750 / 7500) X 900	900	$           630	$             270	Favorable
Travel expense	($3000 / 7500) X 900	3,600	$       3,150	$             450	Favorable
Free samples given out	($1125 / 7500) X 900	1,350	$           990	$             360	Favorable
Total Variable cost		$        7,650	$       6,930	$             720	Favorable
Fixed expenses:
Rent		$        1,000	$       1,000	0	Neither favorable nor unfavorable
Sales salaries		$        1,000	$       1,000	0	Neither favorable nor unfavorable
Office salaries		$            600	$           600	0	Neither favorable nor unfavorable
Depreciation - autos (sales staff)		$            400	$           400	0	Neither favorable nor unfavorable
Total Fixed expenses		$        3,000	$       3,000	0	Neither favorable nor unfavorable
Total expense		$      10,650	$       9,930	$             720	Favorable