Eight Flags is a retail department store. The following cost-volume relationships were used in developing a flexible budget for the company for the current year:

Management expected to attain a sales level of $20 million during the current year. At the end of the year, the actual results achieved by the company were as follows:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,000,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,160,000
Selling and promotion expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000
Building occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000
Buying expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720,000
Delivery expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Credit and collection expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,000

Instructions
a. Prepare a schedule comparing the actual results with flexible budget amounts developed for the actual sales volume of $18,000,000. Organize your schedule as a partial multiple-step income statement, ending with operating income. Include separate columns for (1) flexible budget amounts, (2) actual amounts, and (3) any amount over (under) budget. Use the cost-volume relationships given in the problem to compute the flexible budget amounts.
b. Write a statement evaluating the company’s performance in relation to the plan reflected in the flexible budget.
c. Why is a flexible budget useful in evaluating the performance of the Eight Flags store?
d. Do fixed costs and variable costs always change in a flexiblebudget?

Yearly Fixed Expenses per Variable Expenses Sales Dollar Cost of merchandise sold Selling and promotion expense .. Building occupancy expense Buying expense Delivery expense Credit and collection expense. .. Administrative expense. .. $160,000 120,000 100,000 110,000 60,000 300,000 $850,000 $0.65 0.09 0.02 0.05 0.01 0.01 0.02 $0.85 Totals.. .