Managers and auditors always analyze the variances between actual and budget. Say you were auditing this client and they gave you the following story (below). Is the story consistent with the overall pattern of variances? Which elements of the story are consistent with the explanations? Which variances are inconsistent, or left unexplained? Be sure to analyze every line item on the budget. Client Story: In order to motivate our sales force to increase sales, we decided to increase our commissions and salaries and increase marketing. At the same time, our supplier increased its prices, and we felt we could pass that cost increase on to our customers in the form of price increase. However, with the additional pressure to make sales, coupled with the increased sales price, we had to loosen credit terms on sales (extend more credit to more customers). We also had to lease a little more distribution space and acquire another truck to handle the volume increase. Our shipping expense relates to gasoline used for deliveries. Luckily, gas prices went down from what we originally expected this year. In the table below, classify each account on the budget according to whether the variances in the performance report are consistent, inconsistent, or left unexplained by the client's story. Place an "X" in the appropriate column. 16 17 18 19 20 21 Income Statement line item Consistent inconsistent Unexplained 23 All sales volume variances 24 25 Flexible budget variances: 26 Sales Revenue 27 Cost of Goods sold 28 Commission expense 29 Shipping Expenses 30 Bad debt expense 31 Salaries expense 32 Lease of distribution center 33 Depreciation of fleet & Equip. 34 Advertising expense 35 Ofice rent, phone, internet 36