Exercise 10-16

At the start of 2015, the New Orleans Fine Food Company budgeted before-tax income as follows:

Sales $550,000

Less:

Material cost $100,000

Labor cost $220,000

Owner's salary $65,000

Rent $55,000

Depreciation $45,000

Utilities $22,000 $507,000

Income before taxes $443,000

Actual before tax income for 2015 was:

Sales $660,000

Less:

Material cost $130,000

Labor cost $285,000

Owner's salary $65,750

Rent $55,000

Depreciation $45,200

Utilities $21,000 $601,950

Income before taxes $58,050

Florence Roden, the owner of the company, is pleased that sales were much higher than planned, but she also is concerned that expenses were $94,950 higher than the amounts she budgeted. Should she be concerned with the level of actual expenses? Prepare a performance report that will help her focus on areas needing attention.