Client Story: In order to motivate our sales force to increase sales, we decided to increase our commissions and salaries and increase marketing. At the same time, our supplier increased its prices, and we felt we could pass that cost increase on to our customers in the form of price increase. However, with the additional pressure to make sales, coupled with the increased sales price, we had to loosen credit terms on sales (extend more credit to more customers). We also had to lease a little more distribution space and acquire another truck to handle the volume increase. Our shipping expense relates to gasoline used for deliveries. Luckily, gas prices went down from what we originally expected this year.

In the table below, classify each account on the budget according to whether the variances in the performance report are consistent, inconsistent, or left unexplained by the clients story. Place an X in the appropriate column.

Income Statement line item Consistent Inconsistent Unexplained All sales volume variances Flexible budget variances: Sales Revenue Cost of Goods sold Commission expense Shipping Expenses Bad debt expense Salaries expense Lease of distribution center Depreciation of fleet & Equip. Advertising expense Ofice rent, phone, internet