Delivery Expense: ____________________ Buying Expense:______________________ Fou
ID: 2457144 • Letter: D
Question
Delivery Expense: ____________________ Buying Expense:______________________
Four Flags is a retail department store. On January 1, 2014, Four Flags' accountants used the following data to develop the master budget for Four Flags for 2014: Variable (per Cost Fixed unit sold) $5.60 $0.80 Cost of Goods Sold $0 Selling and Promotion $205,000 Expense Building Occupancy $0.10 $0.40 $0.10 $0.03 $185,000 Expense Buying Expense Delivery Expensee Credit and Collection $160,000 $120,000 $74,000 Expense Expected unit sales in 2014 were 1,250,000, and 2014 total revenue was expected to be $12,500,000. Actual 2014 unit sales turned out to be 1,050,000, and total revenue was $10,500,000. Actual total costs in 2014 were: Cost of Goods Sold $6,000,000 Selling and Promotion Expense $900,000 Building Occupancy Expense $360,000 $520,000 $180,000 $80,000 Buying Expense Delivery Expensee Credit and Collection ExpenseExplanation / Answer
Flexible Budget Actuals Variance
Units sold 1,050,000 1,050,000 -
Sales $10 per unit $10,500,000 $10,500,000 -
Cost of goods sold $5.60 per unit $5,880,000 $ 6,000,000 (-)-$120,000
Selling and promotion expense $1,045,000 $ 900,000 $ 145,000
($0.80 plus $205,000 for flexible budget)
Building Occupancy expense $ 290,000 $ 360,000 (-)$ 70,000
($0.10 per unit plus $ 185000 for flexible budget)
Buying expense $ 580,000 $ 520,000 $ 60,000
($0.4 per unit plus $160000 for flexible budget )
Delivery expense $225,000 $180,000 $ 45,000
($0.10 per unit plus $120000 for flexible budget )
Credit and collection expense $105,500 $ 80,000 $ 25,500
($0.03 per unit plus $74000 for flexible budget )
Total expense $8,125,500 $8,040,000 $ 85,500
Net Income $2,374,500 $2,460,000 $ 85,500
The process of flexible Budget is that ,the unit cost needs to be applied to the actual units produced and sold .
Fixed costs are included in each expense item in the flexible budget since the actual figures are spent upto the level of variable cost plus fixed cost also.