Four 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 \(\$ 12\) million during the current year. At the end of the year, the actual results achieved by the company were as follows:

Instructions

a. Prepare a schedule comparing the actual results with flexible budget amounts developed for the actual sales volume of \(\$ 10,500,000\). 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 costvolume 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.

Transcribed Image Text:

Yearly Fixed Variable Expenses per Expenses Sales Dollar Cost of merchandise sold.. $0.600 Selling and promotion expense 210,000 0.082 Building occupancy expense 186,000 0.022 Buying expense 150,000 0.040 Delivery expense 111,000 0.010 Credit and collection expense. 72,000 0.002 Administrative expense.. 531,000 0.003 Totals... $1,260,000 S0.759