In: Accounting
You are given the following static budget report:
Budget Actual Variance
Unit Sales 10,000 15,000 5,000 F
Variable Expenses:
Commissions $30,000 $33,000 $3,000 U
Advertising $1,000 $1,200 $200 U
Travel $10,000 $11,000 $1,000 U
Samples $2,500 $2,300 $200 F
Total Variable $43,500 47,500 $4,000 U
Fixed Expenses
Rent $5,000 $5,000 0
Salaries – Sales $2,000 $2,000 0
Salaries – Office $1,200 $1,200 0
Depreciation $1,500 $1,500 0
Total Fixed $9,700 $9,700 0
Total Expenses $53,200 $57,200 $4,000 U
Prepare a flexible budget analysis and explain whether you believe that costs were controlled. How do the results of the flexible budget differ from the results of the static budget?
Variable expenses: |
|||
For 10,000 budgeted units |
Per unit [based on 10,000 units] |
For actual 15,000 units Flexible Budget |
|
[A] |
[B = A/ 10,000] |
[C = B x 15,000 units] |
|
Commission |
$ 30,000.00 |
$ 3.00 |
$ 45,000.00 |
Advertising |
$ 1,000.00 |
$ 0.10 |
$ 1,500.00 |
Travel |
$ 10,000.00 |
$ 1.00 |
$ 15,000.00 |
Samples |
$ 2,500.00 |
$ 0.25 |
$ 3,750.00 |
Total |
$ 43,500.00 |
$ 4.35 |
$ 65,250.00 |
Budget |
Actual |
Variance |
||
Units Sales |
15000 |
5000 |
||
Variable expenses: |
||||
Commission |
$ 45,000.00 |
$ 33,000.00 |
$ 12,000.00 |
Favourable |
Advertising |
$ 1,500.00 |
$ 1,200.00 |
$ 300.00 |
Favourable |
Travel |
$ 15,000.00 |
$ 11,000.00 |
$ 4,000.00 |
Favourable |
Samples |
$ 3,750.00 |
$ 2,300.00 |
$ 1,450.00 |
Favourable |
Total Variable |
$ 65,250.00 |
$ 47,500.00 |
$ 17,750.00 |
Favourable |
Fixed expenses: |
||||
Rent |
$ 5,000.00 |
$ 5,000.00 |
$ - |
Neither F nor U |
Salaries Sales |
$ 2,000.00 |
$ 2,000.00 |
$ - |
Neither F nor U |
Salaries Office |
$ 1,200.00 |
$ 1,200.00 |
$ - |
Neither F nor U |
Depreciation |
$ 1,500.00 |
$ 1,500.00 |
$ - |
Neither F nor U |
Total Fixed |
$ 9,700.00 |
$ 9,700.00 |
$ - |
Neither F nor U |
Total Expenses |
$ 74,950.00 |
$ 57,200.00 |
$ 17,750.00 |
Favourable |