(Flexible Budget Variances) Golly Girls Clothing is a small retailer of clothing for girls ages 6–12. Golly Girls differentiates itself from its competitors by providing custom tailoring. The company budget and actual results for the month of July are shown below:

Â	Budget	Actual
Revenues	Â	Â
Units sold	240	250
Retail sales	$6,000	$6,100
Custom tailoring	1,200	400
Total revenues	$7,200	$6,500
Expenses	Â	Â
Cost of goods purchased	$1,800	$1,850
Retail clerk wages	1,200	1,450
Tailor salary	1,500	1,500
Selling and admin. expenses	800	825
Total expenses	$5,300	$5,625
Net profit	$1,900	$ 875

The manager of the store is concerned about the profit earned in July, which is less than half of the budgeted profit. She has asked you to analyze the variances and identify areas that should be investigated further to determine why profits are not as high as expected. For the budget, Golly Girls assumes that all units sold will require custom tailoring at a cost of $5 per item; however, customer tailoring was provided on only 30% of the items actually sold.

1. Prepare a flexible budget for Golly Girls and identify key variances that should be investigated.
2. Provide potential reasons for the variances and suggestions that will help the company improve its profitability.