EduSoft Corporations president, Mark Fletcher, was looking forward to seeing the performance reports for October because he knew the companys sales for the month had

EduSoft Corporations president, Mark Fletcher, was looking forward to seeing the performance reports for October because he knew the companys sales for the month had exceeded budget by a considerable margin. EduSoft, a distributor of educational software packages, had been growing steadily for approximately two years. Fletchers biggest challenge at this point was to ensure that the company did not lose control of expenses during this growth period. When Fletcher received the October reports, he was dismayed to see the large unfavorable variance in the companys Monthly Selling Expense Report that follows:

EDUSOFT CORPORATION Monthly Selling Expense Report For the Month of October
	Annual Budget		October Budget		October Actual		October Variance
Dollar sales	$	160,000,000	$	22,400,000	$	24,800,000	$	2,400,000
Unit sales		2,000,000		280,000		310,000		30,000
Orders processed		54,000		6,500		5,800		(700	)
Sales personnel per month		90		90		96		(6	)
Advertising	$	39,600,000	$	3,300,000	$	3,320,000	$	20,000	U
Staff salaries		3,000,000		250,000		250,000
Sales salaries		2,592,000		216,000		230,800		14,800	U
Commissions		6,400,000		896,000		992,000		96,000	U
Per diem expense		3,564,000		297,000		325,200		28,200	U
Office expenses		8,160,000		760,000		716,800		43,200	F
Shipping expenses		13,500,000		1,805,000		1,953,000		148,000	U

Total expenses	$	76,816,000	$	7,524,000	$	7,787,800	$	263,800	U

Fletcher called in the companys new controller, Susan Porter, to discuss the implications of the variances reported for October and to plan a strategy for improving performance. Porter suggested that the companys reporting format might not be giving Fletcher a true picture of the companys operations. She proposed that EduSoft implement flexible budgeting. Porter offered to redo the Monthly Selling Expense Report for October using flexible budgeting so that Fletcher could compare the two reports and see the advantages of flexible budgeting.

Porter discovered the following information about the behavior of EduSofts selling expenses.

	The total compensation paid to the sales force consists of a monthly base salary and a commission; the commission varies with sales dollars.

	Sales office expense is a semivariable cost with the variable portion related to the number of orders processed. The fixed portion of office expense is $6,000,000 annually and is incurred uniformly throughout the year.

	Subsequent to the adoption of the annual budget for the current year, EduSoft decided to open a new sales territory. As a consequence, approval was given to hire six additional salespeople effective October 1. Porter decided that these additional six people should be recognized in her revised October report.

	Per diem reimbursement to the sales force, while a fixed amount per day, is variable with the number of sales personnel and the number of days spent traveling. The original budget was based on an average sales force of 90 people throughout the year with each salesperson traveling 15 days per month.

	The companys shipping expense is a semivariable cost with the variable portion, $6.00 per unit, dependent on the number of units sold. The fixed portion is incurred uniformly throughout the year. 1.) Prepare a revised Monthly Selling Expense Report for October that would permit Mark Fletcher to more clearly evaluate EduSofts control over selling expenses. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Do not round intermediate calculations.)