E8-6 As sales manager, Shawn Keyser was given the following static budget repot for selling expenses in the Clothing Department of Dunham company for the month of October.
DUNHAM COMPANY
Clothing Department
Budget Repot
For the month Ended October 31, 2005
Difference
| |||
Budget
|
Actual
|
Favorable F
Unfavorable U
| |
Sales in units
|
8,000
|
10,000
|
2,000 F
|
Variable expenses
| |||
Sales commissions
|
$2,000
|
$2,600
|
$600 U
|
Advertising Expense
|
800
|
850
|
50 U
|
Travel expense
|
4,400
|
4,900
|
500 U
|
Free sample given out
|
1,600
|
1,300
|
300 F
|
Total Variable
|
8,800
|
9,650
|
850 U
|
Fixed expenses
| |||
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
|
$12,800
|
$13,650
|
$850 U
|
As a result of this budget report, Shawn 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. Shawn knew something was wrong with the performance repot that he had been given. However, he was not sure what to do, and comes to you for advice.
Instructions
(a) Prepare a budget repot based on flexible budget data to help Shawn.
(b) Should Shawn have been reprimanded? Explain
