Sales and Marketing Expense Variances. Trujillo Distributors, a wholly-owned Mexican subsidiary of a U. S. corporation, is evaluating its selling and marketing expenses. Management has estimated that its relevant range of operations is 40,000 to 60,000 sales units. At each of these levels, management has established the following budgets:

The company planned to operate at 48,000 units during 1998. Actual output for the year was 50,000 units. Although the president is not confident that his managers are good cost estimators and are controlling costs, the accounting systems are able to differentiate between variable and fixed costs. Actual costs incurred for sales and marketing activities are:

The budgeted and actual financial results are submitted to the U. S. headquarters at the end of each year. All amounts are translated into U. S. dollars using the projected exchange rate for the end of the year \((\mathrm{M} \$ 1=\$ 0.30)\).
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1. Identify the budget formula for each individual sales and marketing expense.
2. Prepare an analysis for each expense that shows spending and volume variances.
3. Restate the analysis in terms of U.S. dollars according to company policy. Does this translation change the evaluation you would make of the subsidiary's performance? Explain.

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Sales Units 40,000 60,000 Sales and marketing expenses: Transportation..... M$110,000 M$150,000 Credit and collections 57,000 65,000 Direct selling.. 19,800 26,200 Advertising and promotion 11,000 14,000