Tyrone Fletchet, president of SoftGro, Incorporated, was looking forward to seeing the performance reports for Navember because he

Vowew the compony's sales for the month had exceeded budget by a considerable margin. Soffgro, a distributor of educational

software pacicages, had been growing steadly for approximately two years. Fletcher's biggest challenge at this point was to ensure

that the company did not lose control of expenses during thls growth perlad. When Fletcher recelved the November reports, he was

dismayed to see the large unfaworable variance lin the company's Monthly Selling Expense fieport that follows.

Fletcher called in the compary's new controller, Susan Porter, to discuss the implications of the variances reported for November and

to plan a strategy for improving performance. Porter suggested that the company's reporting format might not be glving Fletcher a true

picture of the company's operations. She proposed that SoftGro implement flexible budigeting. Porter offered to redo the Monthly

Selling Expense Report for Nowember using flewble budgeting so that Fletcher could compore the two reports and see the advartages

of flexible budgeting.

Porter discowered the follawing information about the behwior of SoftGro's selling expenses.

The tatal compensation poid to the sales force consists of a monthly base salary and a commission; the commissian varies with

sales dollars.

Sales affice expense is a semivariable cost with the variable portion related to the number of orders processed. The fixed portion of

affice expense is $$5,040,000$ annually and is incurred uniformly throughout the year.

Subsequent to the adoption of the annual budget for the current year, SoftGro decided to open a new sales territory. As a

consequence, approwal was ghen to hire skr additional salespeople effective Nowember $1.$ Porter decided that these additional six

people should be recognized in her revised report.

Fer diem reimbursement to the sales force, while a flwed amount per day, is variable with the number of sales personnel and the

number of days spent traveling. SoftGro's original budget was based on an average sales force of $90$ people throughout the year

with each salesperson traveling is days per month. Actual travel days per salesperson in Nowember were equal to the $15$ days

budgeted.

The compony's shipping expense is a semivariable cost with the variable portion, $$0\mathrm{.}00$ per unit, dependent on the number of unlts

sold. The flwed portion is incurred uniformly throughout the year.

Required:

Why would Susan Porter propose that SaftGro use flexlale budgeting in this situation?

Prepare a revised Monthly Selling Expense Report for November that would permit Tyrone Fletcher to more clearly evaluate

SoftGro's control ower selling expenses.