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.
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As a result of this budget report, Joe 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. 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.

SOLUTION:

(a)
SORIA COMPANY
Selling Expense Flexible Budget Report
Clothing Department
For the Month Ended October 31, 2014

| | | | | | | |Difference |
| | | | | | | | |
| | | |Budget | |Actual | |Favorable F |
| |Sales in units | | 10,000 | | 10,000 | |Unfavorable U |
| |Variable expenses | | | | | | |
| |Sales commissions ($.30) | |$ 3,000 | |$ 2,600 | |$ 400 F |
| |Advertising expense ($.09) | | 900 | | 850 | | 50 F |
| |Travel expense ($.45)