Big Boats, Inc. makes luxury speed boats for water skiing. Actual results and the static budget for the year are presented below. Sales commissions are computed at 5% of gross sales. 1 2 3 4 5 6 7 8 9 10 Net Sales Revenue 11 Cost of goods sold 12 Gross profit 13 SG&A 14 Sales Commissions 15 Administrative Salaries and Wages + Benefits 16 General Expenses 17 Rent 18 Other expenes 19 The expected ROI for this subsidiary is 26% The budget was based on 100 boats being sold. Actual sales for the year was 80 boats. The showroom is 10,000 square feet. Management has a policy of reviewing in more detail any overall budget variances in excess of 10% if the amount is $10,000 or greater. Static Budget Depreciation 20 Total SG&A 41 Administrative Salaries and Wages + Benef 42 43 44 General Expenses Rent Other expenses ACTUAL ENTERANOWERO $ $ $ 750,000 360,000 390,000 $ $ 37,500 120,000 31,000 17,000 21,500 227,000 163,000 This year $ $ IME 21 Operating Income 22 23 24 25 Cash 26 Accounts Receivable 27 Inventory 28 PP&E 29 Total Assets 30 31 32 1. Compute the flexible budget based on actual units sold and the gross profit percentage used for the static budget. 33 A B C 34 35 36 Sales Revenue 37 Cost of Goods Sold 38 Gross Profit 39 Operating Expenses 40 Sales Commissions Actual 300,000 $ 120,000 $ 200,000 $ 430,000 $ 1,050,000 $ 750,000 360,000 390,000 37,500 120,000 52.0% 31,000 17,000 21.7% Prior year 350,000 140,000 120,000 340,000 950,000 + Flex Variance $ F/U $ 1,000,000 500,000 500,000 $ 50,000 100,000 30,000 11,500 22,500 214,000 286,000 This year $ $ $ 400,000 $ 200,000 $ 200,000 $ $ 450,000 $ $ 1,250,000 $ Flex Budget Prior year D 50.0% 28.6% 350,000 140,000 120,000 340,000 950,000 Sales Variance F/U E Stati

Big Boats, Inc. makes luxury speed boats for water sking. Actual results and the static budget for the vear are presented below. Sales commissions are computed at 5% of gross sales. The expected ROI for this subsidiary is 26% The budget was based on 100 boats being sold. Actual sales for the year was 80 boats. The showroom is 10,000 square feet. Management has a policy of reviewing in more detail any overall budget varlances in excess of 10 s if the amount is 510,000 or greater. 1. Compute the flexible budget based on actual units sold and the gross profit percentage used for the static budiget. A o C D 17