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, 2017 Difference Budget Actual Favorable Unfavorable Neither Favorable nor Unfavorable Sales in units 7,800 11,000 3,200 Favorable Variable expenses Sales commissions $1,716 $2,640 $924 Unfavorable Advertising expense 780 1,100 320 Unfavorable Travel expense 3,744 4,950 1,206 Unfavorable Free samples given out 1,482 1,210 272 Favorable Total variable 7,722 9,900 2,178 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 900 900 –0– Neither Favorable nor Unfavorable Depreciation—autos (sales staff) 600 600 –0– Neither Favorable nor Unfavorable Total fixed 4,600 4,600 –0– Neither Favorable nor Unfavorable Total expenses $12,322 $14,500 $2,178 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 $ $ $ $ $ $ Click if you would like to Show Work for this question: Open Show Work

Answer 1

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
Sales in units	11000	11000
Variable Costs:
Sales commissions ($1716/7800 x 11000)	2420	2640	220	Unfavorable
Advertising expense ($780/7800 x 11000)	1100	1100	0	Neither Favorable nor Unfavorable
Travel expense $3744/7800 x 11000)	5280	4950	330	Favorable
Free samples given out ($1482/7800 x 11000)	2090	1210	880	Favorable
Total Variable Costs	10890	9900	990	Favorable
Fixed Costs:
Rent	1700	1700	0	Neither Favorable nor Unfavorable
Sales salaries	1400	1400	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 Costs	4600	4600	0	Neither Favorable nor Unfavorable
Total Costs	15490	14500	990	Favorable

Note: The variable costs in the flexible budget will change in accordance with the level of activity. Fixed costs however, do not change with a change in the level of activity and hence are the same in the flexible budget as in the static budget.