As sales manager,Terry Dewitt was given the following static budget report for selling expenses in the Clothing Department of Garber Company for the month of October.
|
GARBER COMPANY |
|||
|
Budget |
Actual |
Difference Favorable F |
|
|
Sales in units |
8,000 |
10,000 |
2,000 F |
|
Variable expenses |
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|
Sales commissions |
$ 2,000 |
$ 2,600 |
$2,600 U |
|
Advertising expense |
800 |
850 |
50 U |
|
Travel expense |
3,600 |
4,000 |
400 U |
|
Free samples given out |
1,600 |
1,300 |
300 F |
|
Total variable |
8,000 |
8,750 |
750 U |
|
Fixed expenses |
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|
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 |
$12,000 |
$12,750 |
$ 750 U |
As a result of this budget report, Terry 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. Terry 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 Terry.
(b) Should Terry have been reprimanded? Explain.