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I have computed the flexible variances and indicate whether favorable or unfavorable. Here is a bit of additional information: Headquarters are contemplating charging each store
I have computed the flexible variances and indicate whether favorable or unfavorable. Here is a bit of additional information: Headquarters are contemplating charging each store a 5% marketing expense based on sales.
1. How will that affect the operating profit of the store and the money available for managerial bonuses based on actual results for the past year?
2. Explain the flexible budget variances; how to interpret the information; and what action, if any to take. Comment on the 5% marketing proposal too.
| Revenue | Actual | Budgeted | Variance | FAV/UNFAV. |
| $1,325,000.00 | $1,325,000.00 | |||
| Cost of Sales | $790,000.00 | $740,000.00 | -$50,000.00 | U |
| Management | $208,000.00 | $186,000.00 | -$22,000.00 | U |
| Shop Assistants | $230,000.00 | $268,000.00 | $38,000.00 | F |
| Rent | $58,200.00 | $54,450.00 | -$3,750.00 | U |
| Utilities | $31,000.00 | $34,800.00 | $3,800.00 | F |
| Marketing Expenses | $66,250.00 | $66,250.00 | ||
| Net Profit | -$58,450.00 | -$24,500.00 |
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