Jasper Gates, sales manager of Circuit Computers Ltd, was given the following budget performance report for selling expenses in the marketing software department for the month of April 2025.

The recently appointed managing director of the company was pleased that Jasper had been able to increase the department’s sales by 20% over the budgeted sales of 12  000 units. On the other hand, Jasper came in for some severe criticism for the apparent blow‐out of selling expenses in the department. Jasper felt that the criticism received was unfounded, because he believed that, given the level of sales volume achieved, the selling expenses were under control. He is unsure how to argue this point with the managing director, and approaches you as an accountant to help.

Required

(a) Prepare a report based on flexible budget principles.

(b) Does Jasper deserve to be criticised for not controlling selling expenses in this department?

(c) Should the format of future budget reports be changed and, if so, why?

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Sales in units Fixed expenses: Sales salaries CIRCUIT COMPUTERS LTD Marketing software budget report for the month ended 30 April 2025 Budget Actual Variance 12 000 14 400 2 400 F $ 1 800 $ 1 800 Office salaries 1 200 1 200 Rent 2250 2 250 Depreciation delivery vehicles 750 750 Total fixed expenses 6 000 6 000 Variable costs: Sales commissions 2 400 3 168 768 U Advertising expense 1 200 1 200 Free samples and promotions 1 440 2016 Travel expense 6 000 6912 Total variable expenses 11 040 Total expenses $ 17 040 $ 19 296 13 296 - U 576 U 912 U 2 256 U $2.256 U U indicates an unfavourable variance. F indicates a favourable variance.