Answer:
Soria Company
Clothing Department
Selling Expense Flexible Budget Report for the month ended October 31, 2017: (Joe Batista)
Budget Actual Variance Comment
Sales in units 10,000 10,000 0 Neither
Flexed Variable Expenses:
Sales Commission $2,400 $2,400 0 Neither
Advertising Exp. $1,200 $900 $300 Favorable
Travel Expense $4,000 $4,000 0 Neither
Free Samples $2,300 $1,300 $1,000 Favorable
Total Variable $9,900 $8,600 $1,300 Favorable
Fixed Expenses:
Rent $1,700 $1,700 0 Neither
Sales Salaries $1,100 $1,100 0 Neither
Office Salaries $800 $800 0 Neither
Depreciation $400 $400 0 Neither
Total Fixed $4,000 $4,000 0 Neither
Total Expenses $13,900 $12,600 $1,300 Favorable
Explanation:
a) Budgeted Variable Costs were flexed as follows:
i) Sales Commission = $1,872/7,800 x 10,000 = $2,400
ii) Advertising Expenses = $936/7,800 x 10,000 = $1,200
iii) Travel Expense = $3,120/7,800 x 10,000 = $4,000
iv) Free Samples = $1,794/7,800 x 10,000 = $2,300
b) The fixed costs could not be flexed as they remain invariable no matter the activity level.
c) Flexible budget is a budget that adjusts or flexes with changes in volume or activity. It is a more accurate way of assessing performance because it is based on actual volume or activity level unlike a static budget, which remains unchanged.
