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.

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.

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SORIA COMPANY Clothing Department Budget Report For the Month Ended October 31, 2012 Difference Favorable F 2,000 F S 600 U 400 U Budget Actu Unfavorable U Sales in units 8,000 10,000 Variable expenses Sales commissions Advertising expense Travel expense Free samples given out 2,000 2,600 850 4,000 1,300 8,750 800 3,600 1,600 8,000 50 U 300 F 750 U Total variable Fixed expenses 1,500 1,200 800 Depreciationautos (sales staff500500 4,000 Rent Sales salaries Office salaries 1,500 1,200 800 Total fixed 4,000 Total expenses 12,000 12,750 750 U