Hi,Can someone walk me through how to do number 2 of this problem?Thanks!
Chapter 11 Flexible Budgeting and Analysis of Overhead Costs SOFTGRO, INC. Monthly Selling Expense Report for the Month of November Annual November November November Budget Budget Actual Variance Units sol Unit sales ......... 2,000,000 280,000 310,000 $11,200,000 $12,400,000 30,000 Dollar sales ...... $1,200,000 Revenue $80,000,000 Orders processed ......... 54,000 6,500 5,800 Variable (700) 90 90 96 Contri Sales personnel per month ..... ......... $ 1,650,000 $ 1,660,000 (6) $ Advertising . $19,800,000 10,000 U Fixed pro 1,500,000 125,000 125,000 Fixed gen Staff salaries 1,296,000 108,000 115,400 Sales salaries ....... 7,400 U Operat Commissions ..... ....... 3,200,000 448,000 496,000 48,000 U Per diem expense 1,782,000 148,500 162,600 14,100 U Wh Office expenses 4,080,000 340,000 358,400 18,400 U following Shipping expenses ...... 976,500 ...... 6,750,000 02,500 74,000 U able sell $38,408,000 $ 3,722,000 $ 3,893,900 $ 171,900 U The Total expenses .... direct lab Fletcher called in the company's new controller, Susan Porter, to discuss the implications of the lard beli variances reported for November and to plan a strategy for improving performance. Porter suggested adopted that the company's reporting format might not be giving Fletcher a true picture of the company's opera- Required: tions. She proposed that SoftGro implement flexible budgeting. Porter offered to redo the Monthly Selling Expense Report for November using flexible budgeting so that Fletcher could compare the two 1. Prep varia reports and see the advantages of flexible budgeting. Porter discovered the following information about the behavior of SoftGro's selling expenses. 2. Dete 3. Disc The total compensation paid to the sales force consists of a monthly base salary and a commission; mon the commission varies with sales dollars. 4. Build Sales office expense is a semivariable cost with the variable portion related to the number of how orders processed. The fixed portion of office expense is $3,000,000 annually and is incurred uni- unit formly throughout the year. Subsequent to the adoption of the annual budget for the current year, SoftGro decided to open a new CMA, adapte sales territory. As a consequence, approval was given to hire six additional salespeople effective November 1. Porter decided that these additional six people should be recognized in her revised report. For each Per diem reimbursement to the sales force, while a fixed amount per day, is variable with the number gets and of sales personnel and the number of days spent traveling. SoftGro's original budget was based on an variance; average sales force of 90 people throughout the year with each salesperson traveling 15 days per month. The company's shipping expense is a semivariable cost with the variable portion, $3.00 per unit, 1. Stand dependent on the number of units sold. The fixed portion is incurred uniformly throughout the year. 2. Stand Required: 3. Total 4. Flexil 1 . Citing the benefits of flexible budgeting, explain why Susan Porter would propose that SoftGro 5. Flexit use flexible budgeting in this situation. 6. Actua 2. Prepare a revised Monthly Selling Expense Report for November that would permit Mark Fletcher to more clearly evaluate SoftGro's control over selling expenses. The report should have a line for 7. Actua 8. Variat each selling expense item showing the appropriate budgeted amount, the actual selling expense. 9. Varial and the monthly dollar variance. 10. Fixed (CMA, adapted) 11. Fixed 12. Unde
