Q26

Question 26 (6 points) The following static and flexible budget report was prepared for the sales manager of Dreamy Sleep Ltd for the fourth quarter of 2020: Static Budget 20,000 units) Budget Actual Variance S 500,000 $ 550,000S 50,000 F Sales Variable costs: Commisions (15% of sales) Advertising (20% of sales) Travel (10% of sales) U U 75,000 100,000 50,000 225,000 80,000 105,000 55,000 240,000 5,000 5,000 5,000 15,000 U U Fixed costs: Sales salaries Administrative salaries 120,000 120,000 75,000 75,000 195,000 195,000 420,000 S 435,000 $ Total costs S 15,000 Flexible Budget (Actual sales 22,000 units) Budget Actual Variance Sales $ 550,000 $ 550,000 S Variable costs: Commisions (15% of sales) 82.500 80,000 2,500 Advertising (20% of sales) 110,000 105,000 5,000 Travel (10% of sales) 55,000 55,000 247,500 240,000 7,500 F Fixed costs: Sales salaries 120,000 120,000 Administrative salaries 75,000 75,000 195,000 195,000 Total costs $ 442,500S 435,000 7,500 F Required: Assuming the sales manager has control over sales and selling costs, and in your own words: Sales salaries 120,000 120,000 Administrative salaries 75,000 75.000 195,000 195,000 Total costs $442,500 $ 435,000 $ 7,500 Required: Assuming the sales manager has control over sales and selling costs, and in your own words: a) Explain the difference between static and flexible budgets, and why flexible budgets are useful. (3 marks) b) Comment on the manager's performance. (3 marks) Paragraph BIUA ! + Answer (part a): Answer (part b)