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   Â

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.