(Budget-to-actnal comparison) Iroquois Falls Products evaluates performance in part through the use of flexible budgets. Selling expense budgets at three activity levels within the relevant range are shown below.

The following assumptions were used to develop the selling expense flexible budgets:
■ The average size of the company’s sales force during the year was planned to be 100 people.
* Salespersons are paid a monthly salary plus commission on gross dollar sales.
■ The travel costs have both a fixed and a variable element. The fixed portion is related to the number of salespersons, whereas the variable portion tends to fluctuate with gross dollars of sales.
* Sales office expense is a mixed cost with the variable portion related to the number of orders processed.
■ Shipping expense is a mixed cost with the variable portion related to the number of units sold.
A sales force of 90 persons generated a total of 1,600 orders resulting in a sales volume of 16,000 units during November. The gross dollar sales amounted to $14.9 million. The selling expenses incurred for November were as follows:

a. Explain why the selling expense flexible budget would not be appropriate for evaluating the company’s November selling expense, and indicate how the flexible budget would have to be revised.

b. Determine the budgeted variable cost per salesperson and variable cost per sales order for the company.

c. Prepare a selling expense report for November that the company can use to evaluate its control over selling expenses. The report should have a line for each selling expense item showing the appropriate budgeted amount, the actual selling expense, and the monthly dollar variation.

d. Determine the actual variable cost per salesperson and variable cost per sales order processed for the company.

e. Comment on the effectiveness and efficiency of the salespersons during November.
(CMA adapted)

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Number of salespersons ACTIVITY MEASURES: Unit sales volume Dollar sales volume Number of orders processed 15,000 1,000 17,500 $15,000,000 $17,500,000 400 1,500 100 90 20,000 $20,000,000 1,750 2,000 100 100 MONTHLY EXPENSES: Advertising and promotion $ 1,500,000 $ 1,500,000 $ 1,500,000 Administrative salaries Sales salaries Sales commissions Salesperson travel Sales office expense Shipping expense Total 75,000 75,000 75,000 90,000 90,000 90,000 450,000 525,000 600,000 200,000 225,000 250,000 445,000 452,500 460,000 650,000 675,000 700,000 $ 3,410,000 $ 3,542,500 $ 3,675,000