Cadiz Co. uses flexible budgets to control its selling expenses. Monthly sales a
ID: 2517586 • Letter: C
Question
Cadiz Co. uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $300,000 to $360,000. Variable costs and their percentage relationships to sales are: Sales commissions 5% Advertising 4% Traveling 7% Delivery 1% Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment $10,000. The actual selling expenses incurred in February, 2016, by Cadiz are as follows: Sales commissions $17,200 Advertising 12,000 Traveling 23,700 Delivery 2,400 Fixed selling expenses consist of sales salaries $41,500 and depreciation on delivery equipment $10,000. Prepare a flexible budget performance report, assuming that February sales were $330,000. (List variable expenses before fixed expenses.)
Explanation / Answer
Cadiz Co
Flexible Budget Performance Report for the month of February
February sales - $330,000
Budget
Actual
Difference
Favorable F/Unfavorable U
Variable Expenses:
Sales Commission
$16,500
$17,200
$700 U
Advertising
$13,200
$12,000
$1,200 F
Traveling
$23,100
$23,700
$600 U
Delivery
$3,300
$2,400
$900 F
Total variable cost
$56,100
$55,300
$800F
Fixed Expenses:
Sales salaries
$40,000
$41,500
$1,500 U
Depreciation
$10,000
$10,000
0
Total Fixed cost
$50,000
$51,500
$1,500 U
Total expenses
$106,100
$106,800
$700 U
Budget
Actual
Difference
Favorable F/Unfavorable U
Variable Expenses:
Sales Commission
$16,500
$17,200
$700 U
Advertising
$13,200
$12,000
$1,200 F
Traveling
$23,100
$23,700
$600 U
Delivery
$3,300
$2,400
$900 F
Total variable cost
$56,100
$55,300
$800F
Fixed Expenses:
Sales salaries
$40,000
$41,500
$1,500 U
Depreciation
$10,000
$10,000
0
Total Fixed cost
$50,000
$51,500
$1,500 U
Total expenses
$106,100
$106,800
$700 U