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Master Budget Performance report for the month ended June 30 Actual Master Budget Master Budget Working For U Var % Variance (Variance x = Actual - 100)/Master Budget Budget 1,417 .30% Volume (in 21,460 20,00 Given 1,131,020 1,000,000 (20,000 x 50 ) 131,020 13.10% F 8 CIC 600,000 (20,000 x 30) 50,00 (20,000 x 2.5) 40,00 (20,000 x 2) 9,000 (1,000,000 x 90% x 1%) 301,000 2,8 8,6 4.2 7, 9 27,31 13.80% 17.40% 10.50% 8.10% 8 U 9.07% Sales Reveny Less: Variable Expenses: Cost of Good 682,880 Sales Comm 58,685 Shipping Exp 44,213 Bad Debt Exp 16,930 Contribution 328,312 Less: Fixed expenses Salaries 43,000 Lease on dis 15,500 Depreciation 12,000 Advertising 7,750 Office rent, 12,300 Opearting In 237,762 3,0 -1,5 F 40,00 Given 17,00 Given 12,00 Given 10,00 Given 11,00 Given 211,000 7.50% -8.80% 8 8096 0.00% -22.50% 11.80% 12.68% F -2,2 1,3 26,7 F Flexible Budget Performance report for the month ended June 30 Variance = Actual Flexible Budge Flexible Budget Working Var % (Variance x 100) /Flexible Budget For U Actual - Budget Volume (ind 21,460 21,46 Same level of Sale 1,131,020 1,073,000 (21,460 x 50 ) 58,01 5.40% F 39,08 5,0 643,800 (21,460 x 30) 53,65 (21,460 x 2.5) 42,92 (21,460 x 2) 9,65|(1,073,000 x 90% x 1%) 322,973 1 1, 2 7,21 ,3 6.10% 9.40% 3 .00% 75.30% 1.65% 5 U Sales Revenu Less: Variable Expenses: Cost of Good 682,880 Sales Commi 58,685 Shipping Exp 44,213 Bad Debt Exp 16,930 Contribution 328,312 Less: Fixed expenses Salaries 43,000 Lease on dis 15,500 Depreciation 12,000 Advertising 7,750 Office rent, 12,300 Opearting in 237,762 1 3 ,0 -1,50 7.50% -8.80% U F 1 40,00 Given 17,00 Given 12,00 Given 10,00 Given 11,00 Given 232,973 -2,2% 1,3 4,78 -22.50% LF 11.80% 2.06% F Auditors always look at the variances between actual and budget or actual and last year. 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? 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. 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 on 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 or inconsistent with the client's story, or unexplained by the client's story. Place an X in the appropriate column. If the Flexible Budget Variance and Sales Volume Variance differ with respect to one account (i.e., one is consistent and one is inconsistent) then indicate which belongs in which column. Consistent Inconsistent | Unexplained Sales revenue Cost of Goods Sold Commission Shipping Expense Bad debt expense Salaries Lease of distribution center Depreciation of fleet and equip Advertising Office rent, phone, internet Master Budget Performance report for the month ended June 30 Actual Master Budget Master Budget Working For U Var % Variance (Variance x = Actual - 100)/Master Budget Budget 1,417 .30% Volume (in 21,460 20,00 Given 1,131,020 1,000,000 (20,000 x 50 ) 131,020 13.10% F 8 CIC 600,000 (20,000 x 30) 50,00 (20,000 x 2.5) 40,00 (20,000 x 2) 9,000 (1,000,000 x 90% x 1%) 301,000 2,8 8,6 4.2 7, 9 27,31 13.80% 17.40% 10.50% 8.10% 8 U 9.07% Sales Reveny Less: Variable Expenses: Cost of Good 682,880 Sales Comm 58,685 Shipping Exp 44,213 Bad Debt Exp 16,930 Contribution 328,312 Less: Fixed expenses Salaries 43,000 Lease on dis 15,500 Depreciation 12,000 Advertising 7,750 Office rent, 12,300 Opearting In 237,762 3,0 -1,5 F 40,00 Given 17,00 Given 12,00 Given 10,00 Given 11,00 Given 211,000 7.50% -8.80% 8 8096 0.00% -22.50% 11.80% 12.68% F -2,2 1,3 26,7 F Flexible Budget Performance report for the month ended June 30 Variance = Actual Flexible Budge Flexible Budget Working Var % (Variance x 100) /Flexible Budget For U Actual - Budget Volume (ind 21,460 21,46 Same level of Sale 1,131,020 1,073,000 (21,460 x 50 ) 58,01 5.40% F 39,08 5,0 643,800 (21,460 x 30) 53,65 (21,460 x 2.5) 42,92 (21,460 x 2) 9,65|(1,073,000 x 90% x 1%) 322,973 1 1, 2 7,21 ,3 6.10% 9.40% 3 .00% 75.30% 1.65% 5 U Sales Revenu Less: Variable Expenses: Cost of Good 682,880 Sales Commi 58,685 Shipping Exp 44,213 Bad Debt Exp 16,930 Contribution 328,312 Less: Fixed expenses Salaries 43,000 Lease on dis 15,500 Depreciation 12,000 Advertising 7,750 Office rent, 12,300 Opearting in 237,762 1 3 ,0 -1,50 7.50% -8.80% U F 1 40,00 Given 17,00 Given 12,00 Given 10,00 Given 11,00 Given 232,973 -2,2% 1,3 4,78 -22.50% LF 11.80% 2.06% F Auditors always look at the variances between actual and budget or actual and last year. 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? 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. 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 on 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 or inconsistent with the client's story, or unexplained by the client's story. Place an X in the appropriate column. If the Flexible Budget Variance and Sales Volume Variance differ with respect to one account (i.e., one is consistent and one is inconsistent) then indicate which belongs in which column. Consistent Inconsistent | Unexplained Sales revenue Cost of Goods Sold Commission Shipping Expense Bad debt expense Salaries Lease of distribution center Depreciation of fleet and equip Advertising Office rent, phone, internet