Exercise 1-7.

Performance Reports [LO 1]

At Designs by Deirdre, the budgeted income statement for December 2017 indicated sales of $600,000 and cost of sales of $400,000. Actual sales and cost of sales were $700,000 and $425,000, respectively.

Should Deirdre Nelson, owner of the company, be concerned that cost of sales is $25,000 greater than planned? Explain the basis for your answer.