E10-10 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, 2014
Difference Favorable F
Budget Actual Unfavorable U
Sales in units 8,000 10,000 2,000 F Variable expenses
Sales commissions $ 2,400 $ 2,600 $ 200 U
Advertising expense 720 850 130 U
Travel expense 3,600 4,100 500 U
Free samples given out 1,600 1,400 200 F
|
Rent
|
1,500
|
|
1,500
|
|
-0-
|
|
Sales salaries
|
1,200
|
|
1,200
|
|
-0-
|
|
Office salaries
|
800
|
|
800
|
|
-0-
|
|
Depreciation-autos (sales staff)
|
500
|
|
500
|
|
-0-
|
|
Total fixed
|
4,000
|
|
4,000
|
|
-0-
|
|
Total expenses
|
$12,320
|
|
$12,950
|
|
$ 630 U
|
|
|
Total variable 8,320 8,950 630 U Fixed expenses
As a result of this budget report, Joe was called into the president's office and congratu- lated 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.
Instructions
(a) Prepare a budget report based on flexible budget data to help Joe.
(b) Should Joe have been reprimanded? Explain.